MP Gareth Thomas has waded into the controversy around LV=’s demutualisation deal that sees Bain Capital taking it private in return for £100 a head payments to members.
Thomas has accused LV= board chairman Alan Cook and chief executive Mark Hartigan of ‘self-interest’ in approving the deal. He also claims that Royal London had made a higher offer than Bain Capital. Royal London declined to comment on whether its offer was higher than Bain Capital’s.
Writing on Labourlist.org, Thomas said: “The self-interest of two men towards the end of their careers is driving the sale to a notorious private equity giant.”
He added: “As with every previous demutualisation, it is not being led by members who own the business but instead being driven by the chairman and chief executive. They have an obvious massive conflict of interest, negotiating a deal that will benefit them both hugely. Not surprisingly, they have kept the details of alternative bids secret, though apparently well-informed sources have been clear they received at least one offer that matched if not bettered the offer from Bain”.
One of those alternative bids, according to Thomas, was from Royal London, which made a higher bid than Bain Capital. LV= refused to comment on Royal London’s offer, citing confidentiality clauses, but it did state that the Bain Capital deal provided the “highest possible distribution for members, and that’s the key point in terms of price being paid”. An LV= spokesperson said: “The core criteria for the board was who was going to pay the most and what was the best outcome for members.”
Thomas says that while the Financial Conduct Authority and the Bank of England met with the LV= board and management over 60 times, they never met with the consumers/owners of LV= directly. Thomas criticised LV= for failing to disclose critical information about the proposed demutualisation and sale. He also stated that independent experts who supported the sale and demutualisation, have been chosen, paid for, and briefed by representatives of LV’s management.
Thomas has also called out Bain Capital for its controversial mode of operation. “Bain’s traditional modus operandi is to cut costs, axe jobs, take bigger and bigger sums out of the business as dividends, weaken customer service and fatten the business up for sale at a healthy profit a few years on,” he said.
LV= chair Alan Cook says: “In order to be successful in a highly competitive market, we need significant investment to compete and achieve our ambitions for growth. 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. Whilst none of the bids would have allowed LV= to remain as a standalone mutual, this deal provides the highest distribution to With-profits policyholders compared to continuing with ‘business as usual’ or closing to new business.”