Bain, a US private equity shark is accused of “smoke-and-mirrors” over a proposed LV purchaseout

Bain Capital was accused of using smoke and mirrors tactics to buy LV. It also revealed that it will not invest any of its money in the future of the insurance company.

LV bosses chose the US-based private equity firm as their preferred bidder in last year’s auction. They claimed the historical mutual needed money from a third party to finance its expansion and investment in technology.

LV’s chairman Alan Cook said selling the business – which would involve giving up its cherished mutual status, meaning it is owned by its customers – was the only way to secure this investment and LV’s future.

US private equity firm Bain was chosen as the favoured bidder last year by LV’s bosses, who claimed that the historic mutual desperately needed cash from a third party

LV bosses chose US private equity firm Bain as their preferred bidder in last year’s auction. They claimed the historical mutual needed money from a third party because of its historic nature.

But as Bain broke cover yesterday to tout the deal – in the face of heavy criticism from MPs and campaigners – it admitted that none of its own money would be pumped into investing in LV. 

Instead, it will be using £160million of the insurer’s own cash flow to modernise LV’s tech.

Mutuo’s Peter Hunt said that it was all smoke and mirrors. This deal tells a story about members and customers that are really stumping up the money.

Bain is offering to pay £530million for LV, formerly Liverpool Victoria – but none of this will actually go towards investment in the business.

A chunk of it will go towards paying off LV’s 1.2m members, giving them £100 each to give up their ownership of the insurer.

The members with more generous policies for profit will get an additional 0.1% to their final payout. This is just 0.1% for each year of ownership. 

This sum has been called a “paltry” amount by MPs, but members describe it as a “bribe”. Another £264million will go towards future pension contributions for LV employees. 

The pension funds have a good capitalisation and are happy to receive small contributions each year from the company.

The remaining £54million will be used to cover the costs of the Bain deal, including the multi-million-pound bills racked up on advisers and lawyers.

A spokesperson for LV stated that Bain’s purchase of LV was still better for its members than letting it continue as normal, since it removed risks.

LV without Bain would need to continue paying into its pension funds. This could leave members’ money vulnerable if it underperformed or ran out of cash. 

Bain is also important because members could lose their money if LV invests in technology and it fails to pay off.

However, several Mail members have indicated that they are willing to take the risk and prefer that LV remain as a mutual run for their members instead of a greedy private equity company.

Voting on the deal can be done online or by postal mail until December 8. Members may also vote during a live webinar or in person on December 10.

Let your voice be heard on LV 

We are encouraging LV members, customers, or others, who would like to see it retain its mutual status, rather than be bought out by private equity,  to write to it.

The wording of the Daily Mail’s City pages letter could be used (pictured below).

Below are the words that you can copy and paste in a letter. 

You can send it to Alan Cook (Chairman of LV=), Liverpool Victoria County Gates Bournemouth BH1 2NF 

Dear Alan Cook,

I urge you, the undersigned to reconsider your decision of selling LV= to Bain Capital. Instead, keep it in its mutual status.