The camp of Liverpool Victoria Financial Services Limited (LV=) – which is asking members to green-light its £530 million takeover deal with Bain Capital Credit LP – wants to “clear up the fog,” issuing a statement this morning to outline details of Royal London’s previous offer and why it was considered inferior. LV= chair Alan Cook also speaks up following what is suggested to be an ill-timed intervention by Royal London.
According to LV=, it received 12 indicative, non-binding proposals during the auction process. Out of those, four were invited to take part in more detailed discussions about a possible transaction. The four parties, including Bain Capital and Royal London, were given access to confidential information to carry out due diligence and substantially reduce conditionality in their proposals.
The life insurer noted: “This resulted in LV= receiving three offers of which one was materially lower from a value perspective. The two remaining parties were Bain Capital and Royal London, and both were asked to clarify certain aspects of their proposals, advance their outstanding due diligence, and submit a best and final binding offer.
“In comparing the final proposals from Bain Capital and Royal London, the board of LV=, taking advice from the with-profits committee, the with-profits actuary, and its advisers, unanimously concluded that Bain Capital offered the best outcome for LV= members.”
Below are the board’s reasons for picking the private investment firm over the pensions giant.
|
Metric |
Bain Capital’s offer |
Royal London’s offer |
|
Value |
£530 million for LV=’s non-profit business, plus assumption of all material historic and future liabilities, as well as perpetual fixed rate card for both administration and investment management |
£540 million but was proposing to leave material liabilities in respect of the non-profit business with LV=’s with-profit fund, with higher and less certain administration and investment management costs |
|
Certainty |
Submitted a final offer which was substantially complete from a due diligence perspective and provided execution certainty |
Proposal had material due diligence outstanding which could have further impacted value and/or risk to LV= members |
|
Investment and heritage |
Committed to investing in and supporting the growth of the LV= new business franchise and brand |
Proposal would have resulted in the rationalisation of LV=’s operations and significant headcount reductions |
|
Structure |
Proposing to structure the transaction as a full acquisition of the non-profit business into a separate fund open to new business, with the with-profit fund to receive the purchase consideration and become ring-fenced with oversight from a supervisory committee |
Would have transferred the with-profits business into a closed ring-fenced sub-fund but was proposing to leave material liabilities in respect of the non-profit business, with no dedicated committee to safeguard interests of with-profits members |
In terms of certainty, the insurer also noted that Royal London declined LV=’s request to progress due diligence investigations during the final stages.
“In contrast to the position of other bidders in the process and general market practice, Royal London insisted that it did not wish to incur the additional marginal cost ahead of being granted exclusivity,” highlighted LV=.
“This was not a request that LV=’s board could accept as it would have significantly weakened its negotiation position with Royal London and would have involved terminating discussions with other parties who ultimately put forward a better and more certain transaction to the benefit of LV= and its members.”
Structure-wise, LV= stressed that Royal London’s proposal would not have resulted in LV= members having any membership rights in the enlarged mutual group. “To describe Royal London’s proposal as offering ‘a mutual alternative, more favourable to LV= members’, is grossly misleading,” asserted LV=.
The insurer’s statement went on to read: “The board confirms that an e-mail was received from Royal London last week, being almost a full year after our transaction with Bain Capital was announced. It proposed the dismantling of LV=.”
Meanwhile, ahead of LV=’s special general meeting, webinars and Q&A sessions will be held with members.
As for Cook, he had this to say: “Despite having every opportunity, Royal London failed to submit a superior best and final offer, and therefore the board unanimously concluded that the better value, certainty, investment, and structure of Bain Capital’s proposal would be in the best interests of our members.
“The board of LV= is clear that at no point have any of Royal London’s proposals included an offer for membership rights or continuation of mutuality for LV= members, contrary to media speculation. Given this context, the board of LV= believes it is unfair and misleading to characterise any proposal from Royal London as preserving mutuality or offering a real mutual alternative.”
“We are also surprised and disappointed by the timing of Royal London’s intervention, which comes more than a year after we terminated our confidential discussions and is seeking to destabilise the conclusions of our comprehensive strategic review, in close proximity to what is a very important vote for our members,” he continued.
“Given our special general meeting on December 10, we are seeking to clear up the fog for our members and remove all the uncertainty and confusion that has been created for our members ahead of what is a very important vote.”
LV= also asserted that the most recent press statement by Royal London proposing a three-way transaction with Bain Capital underlines not only its rival’s lack of interest in supporting LV=’s new business franchise but also its intentions to break up LV=.
