LV members’ £43m takeover bill: That is the eyewatering amount life insurer is spending on controversial sale to American private equity sharks
LV members will have to stump up £43million to cover the historic insurer’s controversial sale to private equity shark Bain Capital.
Bosses at LV have refused to disclose the amount they were spending on bankers, lawyers and other advisers as they try to push the sale through.
But a document tucked away on LV’s website – written by consultancy firm Milliman which LV has paid to be an ‘independent expert’ overseeing the deal – reveals that total costs are estimated to hit £43million.
Costing: A document on LV’s website, written by consultancy firm Milliman which LV has paid to be an ‘independent expert’ on the deal, reveals total costs are estimated to hit £43m
This bill covers all costs associated with the transaction including the fees paid to advisers. A large chunk of the money will be handed to Fenchurch, the investment bank run by Tory party treasurer Malik Karim which is advising LV.
Other outfits taken on by the insurer to work on the deal include City spinners FTI Consulting and law firm Clifford Chance.
Baroness Altmann, the former pensions minister, said: ‘I just don’t see what value members are getting and how the company can justify that level of fees for a deal that offers them so little.
‘It’s jobs for the boys. This does not look like a good deal for members but it does look like a brilliant deal for managers and their advisers.’
The £43million bill amounts to £36 for each of the 1.2m LV members who own the mutual. They are being asked to hand over ownership to Bain in exchange for just £100 each, plus a moderate uplift for those with more generous ‘with profits’ policies.
‘Benign neglect’ of City regulator
The City watchdog was dragged into the row over LV’s future as experts accused it of doing too little to protect the insurer’s members.
The Financial Conduct Authority (FCA) has given its blessing to the takeover of LV by US private equity firm Bain Capital.
The FCA said its role was to look at the deal and make sure the proposals treated customers fairly and ensure they faced no ‘adverse impact’.
But Martin Shaw, head of the Association of Financial Mutuals, said the FCA could have done more and said mutuals had suffered from a culture of ‘benign neglect’ at the hands of governments and regulators.
The full scale of the fees emerged as LV bosses were blasted for a series of ‘shortcomings’ over the controversial sale of the 178-year-old insurer formerly known as Liverpool Victoria.
In a parliamentary hearing into the future of the mutual sector, MPs were told LV members lacked some of the information required to vote on the £530million takeover.
LV chairman Alan Cook and chief executive Mark Hartigan were criticised for poor communication and a lack of transparency in the way they had gone about flogging the firm.
It comes with just over two weeks to go before voting on the deal ends on December 10.
Giving evidence to the Treasury committee, Martin Shaw, boss of the Association of Financial Mutuals, said: ‘There are a number of shortcomings in their approach and I think if the directors had their time again, they would improve the quality of communication throughout.’
Shaw also accused LV of riding roughshod over protections it put in place to prevent ‘carpet-bagging’ by financial opportunists hoping to make a quick buck.
He also criticised Cook and Hartigan for a ‘potential conflict of interest’ as both are hoping to keep their jobs after the deal.
Hartigan has admitted he would likely receive a much higher pay package and even an equity stake in the firm – potentially worth millions – if he stays as boss.
Shaw said: ‘The difficult position that [Hartigan and Cook] find themselves in is they’re looking to maintain their roles. If they were simply stepping aside it would be a black and white position of saying they’ve led the negotiations but they step aside afterwards.’
Giving evidence alongside Shaw, Mike Regnier, of the Yorkshire Building Society, and Lucky Chandrasekera, of the London Mutual Credit Union, warned the loss of another member-owned company would not be good for customers.
An LV spokesman said: ‘This estimated cost covers all aspects of the transaction until completion, a period of more than two years.
‘This takes into account the regulatory process, two court processes, the member vote and two independent experts as well as all operational aspects.’
Make your voice 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.
You could use the wording from the letter printed in the Daily Mail newspaper’s City pages (pictured here).
We have included the words for you to copy and paste into a letter below.
Send it to Alan Cook, Chairman of LV=, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alan Cook,
I, the undersigned, urge you to reconsider your decision to sell LV= to Bain Capital and instead maintain its mutual status.