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Insurance battle

LV= rejects revised approach from Royal London

LV=

LV= continues to back Bain Capital bid

Insurance company LV= has rejected the revised proposal from Royal London and will continue to recommend the takeover offer from Bain Capital.

Two initial proposals were considered from 12 it received and the board concluded that Bain Capital offered the best outcome for LV= members.

In a statement responding to Royal London’s revised proposal, the board said it “confirms that an e-mail was received from Royal London last week, being almost a full year after our transaction with Bain Capital was announced.

“It proposed the dismantling of LV=. The board of LV= continues to unanimously recommend the transaction with Bain Capital to its members ahead of the special general meeting on 10 December.”

Explaining its decision, LV= said Bain Capital offered £530 million for LV=’s non-profit business and would also assume all material historic and future liabilities in respect of the non-profit business. Bain Capital also offered a perpetual fixed rate card for both administration and investment management.

Royal London offered a marginally higher headline value of £540 million. However, unlike Bain Capital, Royal London was proposing to leave material liabilities in respect of the non-profit business with LV=’s With-Profit Fund.

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Additionally, Royal London’s proposal included higher and less certain administration and investment management costs. 

“Reflecting these differences, the value offered by Royal London was lower than the value offered by Bain Capital, on a comparable basis,” said the board.

“Therefore, the board of LV= concluded that Bain Capital offered greater value to LV= members when compared on a like-for-like basis and would result in greater and more certain pay-outs to members, on a more accelerated basis.”

The board added that Bain Capital is committed to investing in and supporting the growth of the LV= new business franchise and brand.

“As mentioned in Bain Capital’s announcement yesterday, it is committed to investing up to £160 million as part of its go-forward plan for LV=.

“By contrast, Royal London’s proposal would have resulted in the rationalisation of our operations and significant headcount reductions which were positioned as an important element of value creation for Royal London. Additionally, no commitment was offered with respect to our office locations in Exeter and Hitchin.”

Alan Cook, chairman of LV=, commented: “Despite having every opportunity, Royal London failed to submit a superior best and final offer, and therefore the board unanimously concluded that the better value, certainty, investment and structure of Bain Capital’s proposal would be in the best interests of our members.

“The Board of LV= is clear that at no point have any of Royal London’s proposals included an offer for membership rights or continuation of mutuality for LV= members, contrary to media speculation.

“Given this context, the Board of LV= believes it is unfair and misleading to characterise any proposal from Royal London as preserving mutuality or offering a real mutual alternative.

“We are also surprised and disappointed by the timing of Royal London’s intervention, which comes more than a year after we terminated our confidential discussions and is seeking to destabilise the conclusions of our comprehensive strategic review, in close proximity to what is a very important vote for our members.

“Given our Special General Meeting on 10 December, we are seeking to clear up the fog for our members and remove all the uncertainty and confusion that has been created for our members ahead of what is a very important vote. 

“The board of LV= continues to unanimously recommend the transaction with Bain Capital to its members ahead of the Special General Meeting on 10 December.”

David Barral, Senior Independent Director of LV= , commented: “The proposed transaction with Bain Capital continues to represent the best outcome for members given its attractive valuation and the enhanced and accelerated pay-outs to LV= members, the certainty offered by removing any business risk from the With-Profit Fund, the release of capital to support LV=’s defined benefit pension scheme liabilities and repay LV=’s debt whilst also distributing value to members and the on-going investment by Bain Capital in LV=’s franchise and brand.

“These attributes are far superior to any proposal received from other third parties, including Royal London.

“The board therefore continue to unanimously recommend to LV= members to vote in favour of the proposed transaction with Bain Capital.”



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