LV= has defended its decision to accept the £530 million takeover bid from US private equity firm Bain Capital, arguing that the deal will bring the financial stability the mutual insurer needs.
The transaction has drawn strong opposition from its 1.2 million members, with many threatening to vote down the deal after they were offered just £100 in payout in exchange for losing their mutual status. The voting is scheduled for 10 December.
On Monday, LV= board members released a detailed analysis explaining why the Bain deal provided the “best financial outcome” and why a “business as usual” strategy would not work.
The analysis claimed that a takeover by the US firm would result in £212 million in extra capital available for distribution to members, increasing the total expected distributions to £616 million. The amount includes the proceeds from the sale of LV=’s general insurance arm to Allianz in 2019.
The company added that retaining its current structure as an independent mutual would not have been fair to its members, given that considerable investment was still needed, which meant “high execution risks and the possibility that many of them would not see a return.”
“We all came to the firm conclusion it would not be fair for us to ask our with-profit members to finance a future that requires significant investment, which many would not benefit from,” said David Barral, LV=’s senior independent director. “It was a decision we didn’t take lightly given our mutual heritage, but we know it is the right choice because it saves the future of LV=.”
The insurer plans to pay out a total of £533 million to its 271,000 with-profit members at an average of £1,970, more than the £1,490 average without the takeover, while its estimated 830,000 non-profit members will receive £100 each.
“There have been numerous theories and opinions about the process and decision,” said LV= chairman Alan Cook. “So that members can vote with the facts in front of them, we are showing the analysis we did and the conclusions we reached. We urge members to vote at the meetings on 10 December and vote in favour of the transaction with Bain Capital to protect both their interests and the future of LV=.”
