What is LV=?
LV= is a pensions and life insurance mutual originally known as Liverpool Victoria. It was founded in 1843 with the original aim of allowing Liverpool’s poor to cover burial costs.
It has roughly 1.2 million members, 297,000 of which are “with-profits” policyholders, meaning they tend to receive payouts based on the performance of the business, and legally own LV= collectively.
Why does Bain Capital’s proposed £530m takeover matter?
The deal will mean abandoning its status as a mutual owned by its member-customers, and handing ownership to the private equity firm Bain Capital.
Campaigners are concerned that the takeover will result in worse payouts for customers and poorer customer service.
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MPs also fear that private equity firms’ focus on profits could result in stripping the company of its assets and loading it with debt before selling it to another bidder in a few years’ time. Bain has said it will not saddle LV with debt.
Furthermore, some members believe they have been left in the dark about a rival bid by mutual Royal London – which they say could have maintained the company’s mutual status – as well as what LV=’s chief executive and chair may gain from choosing Bain over rival suitors. However, LV= has denied that either of the men stand to personally benefit.
What is Bain Capital?
Bain Capital is an American private equity firm co-founded by Republican party member Mitt Romney in the mid-1980s. In the US, Bain is known for helping create the American office supplies chain Staples, but specialises in turning around struggling companies.
Private equity firms such as Bain – which has $150bn (£112bn) in assets under management – often target struggling businesses with strong cashflows. They often borrow heavily to buy those companies, and then sell them for a profit after an overhaul, which can sometimes result in job cuts or selling off assets.
In the UK, Bain took over listed insurer esure in a £1.2bn deal in 2018, ending two years of speculation over a potential private equity buyout. Its founder Peter Wood said at the time that the offer from Bain had “come out of the blue”. Wood, who agreed to stay on as chair after the deal, was in line to receive £371m from the deal, according to reports.
What happens next?
The Bain deal will now be put to LV= members on 10 December. Voters will be asked to cast ballots on two issues: whether or not to approve the deal, and how such a transaction should be executed, either fully transferring the business to Bain, or ring-fencing the old business and allowing Bain to conduct new business under the LV= name.
The deal will only require approval from 75% of members who vote, with no quorum – meaning there is not a minimum threshold on the number of members who are required to cast their ballot to ensure it is valid.
The Financial Conduct Authority said last month it did not intend to block the takeover or plans to demutualise the firm.