LV has hit out a fresh acquisition proposal from Royal London, claiming the offer would break up the business and lead to job cuts and negative impacts on members.
Royal London, which was beaten to an agreed takeover of LV by Bain Capital last December, reportedly proposed a deal that involves splitting parts of LV with the US private equity firm, in a three-way deal.
In a detailed statement released this morning (16 November), LV confirmed it had received an email from Royal London last week proposing ‘the dismantling’ of LV. However, the board said it continues to unanimously recommend the sale of the business to Bain Capital ahead of the member vote in December.
Bain Capital issued a statement yesterday (15 November) reassuring LV members that it remains committed to the continued success of the business.
LV said in its statement today: ‘The most recent press statement by Royal London proposing a three-way transaction with Bain Capital underlines its lack of interest in supporting LV’s new business franchise and its intentions to break up LV.’
LV said Royal London’s latest proposal could lead to:
- significant headcount reductions, with no commitment to LV’s Exeter and Hitchin offices;
- moving LV’s White Profits business into a closed ring-fenced sub-fund of the group, with liabilities left in the fund, and;
- LV members losing membership rights in the enlarged mutual group.
‘To describe Royal London’s proposal as offering “a mutual alternative, more favourable to LV members”, is grossly misleading,’ the LV statement added.
A superior offer
Alan Cook, chairman of LV, said that despite having had every opportunity, Royal London ‘failed to submit a superior best and final offer’ over Bain Capital and, contrary to speculation, a sale to Royal London would not have guaranteed the continuation of mutuality for LV 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,’ he said.
‘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.’
In its statement today, LV said that while Royal London originally offered £10m more than Bain Capital at £540m (Bain offered £530m), Bain also agreed to assume all material historic and future liabilities in respect of the non-profit business, while Royal London proposed to leave all material liabilities with LV’s With-Profit fund.
‘Additionally, Royal London’s proposal included higher and less certain administration and investment management costs,’ the business said.
‘Reflecting these differences, the value offered by Royal London was lower than the value offered by Bain Capital, on a comparable basis.
‘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.’
Royal London has been approached for comment.