Bosses at LV were accused of ‘taking members for fools’ after they finally published details of the mutual’s £530million buyout by private equity giant Bain Capital.
Takeover documents released yesterday show LV’s 1.2m members would get just £100 each for giving up their ownership stake in the historic life insurer.
Even the 297,000 members who have ‘with-profits’ policies – and who share in the performance of the company – will only get an extra £52.
‘Paltry’: Takeover documents released yesterday revealed LV’s 1.2m members would get just £100 each for giving up their ownership stake in the historic life insurer
A small number of members with more valuable investments will see a larger payout – £630 – though this will still be only be a tiny fraction of the size of their policy.
The deal offered to LV’s members contrasts sharply with the millions of pounds the LV bosses could make once the insurer is in private equity hands.
Chief executive Mark Hartigan, who earned £1.2million last year, looks set for an even more generous package under Bain. Chairman Alan Cook will hold on to his job for another two years – pocketing £410,000 on his current fees.
Labour MP Gareth Thomas, chairman of the All-Party Parliamentary Group for Mutuals, said: ‘We thought members didn’t have enough information to judge what’s in their interests. Now we can categorically say that this is a bad deal.
Job losses could be on the way
LV and Bain Capital have refused to rule out job losses after the proposed £530million takeover.
The mutual insurer has around 1,500 staff across its headquarters in Bournemouth and offices in Exeter and Hitchin. LV said one reason why it chose Bain rather than fellow British mutual Royal London was to protect jobs.
But asked by the Mail how many jobs would be protected, Bain and LV declined to comment. Instead, Bain head of insurance solutions Matt Popoli spoke of his ‘support for an ongoing presence across LV’s three UK sites’.
He added: ‘We look forward to investing in the LV brand and its people for the long-term.’
LV chairman Alan Cook said: ‘In order to be successful in a highly competitive market, we need significant investment to compete and achieve our ambitions for growth.’
‘A paltry £100 in return for membership rights to hand over a business focused on its customers to a private equity shark intent on screwing the maximum profit for itself.
‘LV bosses are taking members for fools, offering them £100 each to facilitate this plan to line their pockets.
‘Another £410,000 for the chairman and countless millions for the chief executive.’
LV, formerly known as Liverpool Victoria, was set up in 1843 to give poorer residents of the city a chance to give their loved ones a decent funeral. It is currently structured as a mutual, meaning it is owned by policyholder members instead of shareholders.
This ensures it is run entirely for the benefit of its customers, not profit-hungry investors.
Tory peer Baroness Altmann, a former pensions minister, said: ‘Members’ interests are not necessarily best served by this deal.
‘Regardless of the £100 payout, we don’t know whether in the long run it might cost more if prices are increased, as the new owners will be out to make a profit.
‘I would urge all members to vote and really think carefully if £100 will be enough to compensate them for higher prices.’
Hartigan and Cook have insisted they will not get any bonuses associated with the deal. But, speaking in Parliament last week, Cook admitted Hartigan would be given a generous pay package if he was kept on as chief executive under Bain.
Unveiling the terms of the deal yesterday, Hartigan said: ‘The company going forward will be financially strong and will be structured with less debt.
‘This transaction will enable LV to continue to look after over 1m customers, while creating investment in our business that will enhance the services we provide.’
LV chief exec Mark Hartigan (left), and chairman Alan Cook (right) will hold onto their jobs for another two years
Cook added: ‘Bain Capital was the only option that offered both an excellent financial outcome for members and gave unrivalled support for the LV brand, our people and locations.’
Past demutualisations have rewarded members much more generously. The average windfall for Scottish Widows policyholders when it ditched its mutual status in 2000 was £6,000, according to the Association of Financial Mutuals (AFM).
Standard Life in 2006 gave an average payout of £1,250, while Friends Provident in 2001 handed out £1,200.
Martin Shaw, chief executive of the AFM, said the £100 Bain offer to LV members was ‘low compared to previous demutualisations’, and added: ‘Members are being asked to sell their rights in the business for less than the cost of a good meal out.’
Vote this terrible takeover down, urge critics
LV Members have been urged to vote against the 178-year-old mutual’s takeover by American private equity barons.
The planned £530million sale to Bain Capital will only go ahead if it is backed by members, who can vote online or by post between now and December 8.
Or they can vote online during a special general meeting on December 10.
Tory MP Kevin Hollinrake said: ‘My message to members is: ‘Don’t vote for this deal.’ In fact, actively vote against it.
‘You’ll be worse off in the long run, as will other consumers, because this deal is bad for competition and will result in the loss of another mutual, which are businesses set up to protect members.
‘The payout demonstrates yet again that this deal is good for the executives, but not for members.’
Liberal Democrat peer Lord Wrigglesworth said the ‘paltry’ £100 offer was ‘an insult’ to members. ‘I would advise members to vote against the deal,’ he said. ‘The regulators made it clear they will not intervene, the Government will not intervene, so it’s in the hands of members who in my view should vote against it.’
LV’s constitution requires 75 per cent of voting members to back the deal, on a turnout of at least 50 per cent. But LV members will be offered two votes.
The first requires 75 per cent of voting members to approve the takeover. The second allows LV to ditch the 50 per cent turnout threshold, meaning it could go through with a fraction of members’ support.
If the vote on scrapping the rule requiring a 50 per cent turnout is lost, bosses will push ahead with the deal under a different guise and members will be paid just £60.
Peter Hunt, of mutual advocacy organisation Mutuo, said: ‘LV bosses have such a low opinion of their members they think a £100 bribe is sufficient for them to be allowed to continue with their asset stripping.
‘The only way to stop this dreadful deal is to vote against it. LV bosses will be hoping for a low turnout so the deal passes because of a few people taking the £100 who couldn’t care less about anything else. The more members vote, the worse a chance the deal has of passing.’
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.
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