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LV= sale takes another plot twist

Reports that PE firm and rival mutual could split up the business after deal is finalised

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The sale of British insurer LV= to American private equity firm Bain Capital is a saga that never seems to end.

According to the Mail on Sunday, Royal London has approached LV=’s chief executive Mark Hartigan to propose a post-acquisition deal.

In the email, the insurance company suggested that it could purchase some of LV=’s policies, leaving the rest of the business to Bain Capital to turn into a separate entity.

It also proposed to enter into an ‘early three-way discussion’ in the event the Bain Capital takeover is rejected by LV=’s members, the British newspaper reported.

A Royal London spokesperson said: “We have been in contact with LV= and have asked them to consider if their current proposal to members could be enhanced. We are ready to explore any option for the business that delivers a better member outcome, and we believe there are significant benefits for LV= members in being part of another mutual. This could involve the business as a whole or just the ‘with profit’ members.

“The board of LV= has not taken up our offer to discuss other possible options but our door is open and we remain ready to engage.”

Separately, Matt Popoli, a managing director of Bain Capital, said in a press release: “Our proposed investment maintains an independent LV=, and is predicated on LV=’s inherent significance, its heritage and brand.

“To be sustainable and achieve long-term success, LV= needs capital to address its heavy debt pile, fund its pension liabilities and invest for growth. With-profits members should not bear the burden of this investment. As a result of the transaction, LV= will be strengthened with access to more capital and structured with less debt.”

Timeline

The £530m ($710m, €619m) M&A deal has been under the microscope since it was announced nearly a year ago.

Following concerns from MPs and the All-Party Parliamentary Group for Mutuals, the insurance company received approval from the Financial Conduct Authority to put the proposed acquisition before its members.

The vote will take place on 10 December 2021, where members will need to decide whether to accept Bain Capital’s offer and, if so, set out the next steps which could result in either transferring the business fully to the private equity firm or allowing it to operate under the LV= brand.

Royal London’s involvement in the M&A saga started before the deal was announced as the insurer was one of the bidders for LV=.

IA recently reported that the insurance provider was considering reviving its offer for the mutual in case members voted down the private equity takeover.

This prompted MPs to write to the FCA asking for clarifications on the matter, as it was believed that Royal London’s original bid was £10m higher than Bain Capital’s, and that choosing it would have not resulted in LV=’s demutualisation as it will if the Bain offer is accepted.

Subsequently, Hartigan was forced to come out in support of the private equity deal saying that it offers the “best financial outcome” for members.

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