Although LV’s boss insists that the controversial sale of its mutual to private equity will secure the future, he has been subject to criticism by politicians and policyholders.
Mark Hartigan, chief executive of LV, told the BBC’s Today programme the 178-year-old insurer’s £530 million sale to US firm Bain Capital was the ‘best financial outcome’ for members.
As politicians across all political spectrums have joined forces to protest the deal that would result in LV losing its status as a mutual, the sale is now the center stage.
One month remains before the members vote on this deal. There are increasing concerns about the group’s future under the control of private equity firms and the potential payouts to members.
Mark Hartigan, chief executive of LV, told the BBC’s Today programme the 178-year-old insurer’s £530 million sale to US firm Bain Capital was the ‘best financial outcome’
Hartigan defends the Bain bid decision and urges members to vote next month for it.
He stated, “It is the only agreement that will secure our future.”
“This is an important British brand, it’s the only bid that guarantees it.
LV – formerly Liverpool Victoria – is a company that was created in 1843 for Liverpool’s poor to help them pay burial expenses. It currently belongs to its 1.2million customers.
Under the deal, they would hand over ownership of the group and receive £100 each while with-profits members will be given an additional boost when their policies mature.
Some members dismissed the payment as ‘paltry’.
LV’s board agreed to the Bain capital deal after receiving around a dozen expressions of interest, including a bid from rival Royal London that is thought to have been for £10 million more than Bain.
LV did not disclose the Royal London Approach’s value.
This week, the All Party Parliamentary Group for Mutuals sent a letter asking the Financial Conduct Authority to release additional information regarding the Bain sale.
Lord Heseltine, former deputy prime minister, has criticised the agreement and urged members to oppose it.
Hartigan stated that Bain was the only business willing to invest in our development.
He added, “That means saving jobs and sites we work in.”
He said that all the options available would have resulted in LV losing its mutuality.
On December 8, members will have the opportunity to speak out at an in-person meeting or online. 75% votes are required to support the takeover, and there must be a minimum of 50% turnout.
There are also concerns that LV may try to change the law so it can exceed the threshold for minimum participation.
According to Mr Hartigan, he will respect the results of the election ‘100%’.
Reports that Bain management had supported the deal were also refuted by him.
He said that there are no incentives for him or anybody else, including the chairman or the board, or any member of the management team.
A petition has been signed by more than 400 individuals on change.org calling upon the City to end demutualization of LV.
LV members have the option to vote no online or in person against this deal before December 8. While LV bosses line up for bumper pay packets after the deal, the policyholders who own the company will get just £100 each (file photo of company’s Bournemouth offices)
A member of the petition joined online and called the plan a “betrayal for Members”.
She stated, “I do not want my savings to generate profits for Bain Capital.”
Lord Heseltine urged LV Members to reject the deal in a passionate appeal. ‘You can vote for the original concept and remain as owners yourselves,’ said the Tory peer. Private equity firms spent an unprecedented £33billion snapping up British firms on the cheap during the pandemic in the first half of this year.
Ed Miliband (Labour’s business spokesperson) also called on members to reject the deal. He said that he is deeply troubled by details regarding the takeover and demutualisation proposed for LV Capital.
“I encourage members to voice their opinions during this process in order to protect their best interest. It is important that the Government does everything possible to promote our co-operative and mutual sector.
“Instead, this is another example of our companies being dangerously exposed for takeovers that strip assets and lose jobs, weakening our national economy.
Bain’s takeover of LV has been criticized by critics.
- LV’s 1500 employees in Bournemouth and Exeter are experiencing job losses;
- LV refusing to disclose details of a rival offer from fellow mutual Royal London, believed to have been £10million more;
- Bosses Alan Cook and Mark Hartigan repeatedly claim that they won’t profit from the sale.
- A rule amendment that will see LV bosses attempt to remove an article from their mutual constitution in order to make the sale easier;
- His role in the Post Office scandal, where he was responsible for the first prosecutions against sub-postmasters wrongly accused.
LV’s board agreed the £530million deal with Bain in December last year after sounding out offers from 12 potential buyers. The Bosses stated that the private equity firm was able to offer LV an ‘unrivalled dedication’. They had in fact planned to amend the rules to gain approval of members. Lord Heseltine, however, called it’reprehensible.
The Bosses acknowledged that they could not reach the required 50 percent voter turnout under LV’s constitution, so they will vote again and ask them to repeal the rule.
Mr Hartigan and Mr Cook plan to stay on if the deal goes through – other offers would have seen them lose their jobs. The former is likely to be handed an equity stake potentially worth millions and his salary would be significantly higher than the £1.2million he was paid last year.
Lord Heseltine pleaded passionately for LV members against the deal. The Tory peer said, “You can vote in favor of the original idea and still be owners.”
Mr Cook has said he will receive ‘no bonuses or incentives’ as part of the deal, but he will retain his £205,000-a-year role for at least two more years.
Bain did not make any guarantees regarding jobs but said that it would continue to be present at all three bases.
Gareth Thomas is the chairman of parliament’s cross party group on mutuals. He urged his fellow MPs to reject the deal. Labour MP Gareth Thomas stated that if members did not vote in overwhelming numbers against the deal, it could lead to another British historic firm being taken over by private equity vultures.
Sarah Olney, Lib Dem spokesperson for business, stated that a potential takeover of LV is extremely worrying, not only for LV but also for British businesses. The deal relies on the restructuring of existing company rules, which is even more alarming.
According to the Green Party, LV bosses are acting as if they were carpet-baggers.
Molly Scott Cato (Finance spokesperson) said, “Whether they stand to benefit personally or not, it seems as though they have a strategy for bribing existing owners with their own cash.”
A spokesperson for LV stated that although none of the bids allowed LV as a standalone mutual to continue, the deal provided the greatest distribution to policyholders with-profits compared with continuing to do business as usual or closing new businesses.
Bain’s Matt Popoli sent a letter to LV Members stating that he was looking forward to making long-term investments in LV and its employees to help preserve and develop the LV legacy for future generations.