Founded in 1843 as a burial society enabling members to pay as little as a penny per week to cover the costs of their funerals, the Society is wholly owned by its members and has grown into one of the largest insurance businesses in the UK. Its status as a Mutual is now threatened with a sale to the U.S.- based Bain Capital Private Equity. The sale is being recommended by the LV= Board, but before going ahead it has to be approved by 75% of LV=`s c297,000 members who take the trouble to vote. Voting, either online or by post, is currently underway, with a deadline of 10th December. This is disturbing on several levels.
1} The motives of the Board are unclear. It claims that LV= will benefit from extra investment, but has been less than transparent in many aspects surrounding the deal. What we DO know is that an alternative bid by Royal London, another Mutual, has been rejected despite allegedly matching the Bain bid.
2) Bain has offered no legally binding guarantees of how it intends to run the company after its takeover. If the past is any guide to the future one only has to examine the Kraft takeover of Cadbury Schweppes and/or the Glazer takeover of Manchester United for evidence of what might happen.
3) The amount of compensation offered to members in return for their loss of membership rights is derisory (£100 each plus c£350 added to their policies on maturity – not index-linked). This is in stark contrast to the compensation paid in the de-mutualisations of some 20 years ago (Scottish Widows, Bradford and Bingley etc.).
4) The literature and voting forms posted to members are complicated and might deter many members from voting.
5) Brexit Britain was supposed to be about ‘taking back control’ not selling off UK assets to foreign countries, as recently happened with Morrisons. But perhaps we shouldn`t be surprised as some of the major donors to the Brexit campaign were themselves involved in Private Equity. They had a different agenda to many who voted for it.
We urge LV members to cast their vote before 10 December and decisively reject this rotten deal.
No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.