ALEX BRUMMER: A key reason why LV members need to be wary of Bain Capital’s bid for the mutual is the huge deficit of information
A key reason why members of mutual insurer LV need to be wary of the Bain Capital offer to take the society into private equity hands is the deficit of information.
Irrespective of their credibility, the advocates of the deal – LV chief executive Mark Hartigan and former Post Office managing director Alan Cook – have not come clean with policyholders. There is a gaping hole in the facts which has become even wider amid the revelation of secret contacts with previously rejected bidder Royal London.
A key aspect of company law, corporate governance, bid and initial public offer documents in the UK is the requirement for meticulous disclosure. Even if existing or potential investors don’t much like the cut of the predators’ jib, it is at least possible to fully explore pros and cons.
Silence is golden: LV chief executive Mark Hartigan and former Post Office managing director Alan Cook have not come clean with policyholders
Take the recent £7billion takeover of Morrisons by private equity barons Clayton, Dubilier & Rice. There was good reason for opposing the bid. It would unleash fat cat payments to chief executive David Potts. Over the longer haul, it could potentially be a danger to Britain’s food security. And the private equity model might load the grocer up with so much debt that staff, suppliers and other stakeholders would suffer.
In contrast, these are known unknowns when it comes to LV’s deal with colossus Bain Capital. Questions of detail are met with a wall of silence. When Hartigan is publicly questioned about his own potential rewards, should LV end up in new equity ownership, there is obfuscation as to how he could benefit by millions of pounds.
Let’s contrast this with the Morrisons transaction. In the process of the bid battle, buyer CD&R and its rival Fortress were required to put everything into the public domain.
This went beyond what was legally required to statements about future employment, headquarters and agreements with the target’s pension fund trustees. These are vital because when any enterprise falls into private equity hands the ‘covenant’ is weakened.
Bain Capital’s offer for Liverpool Victoria presents a cacophony of unanswered questions. We are told that Alan Cook and his colleagues considered more than 12 offers before alighting on the Bain Capital bid and an approach from fellow mutual society Royal London wasn’t as good.
At Morrisons, directors and shareholders had to hand most of the detail they needed to make a judgement. There was full transparency. Policyholders in LV, the voting members, are deprived of reliable data.
What precisely were the rejected terms of the potential Royal London deal? Could there be a joint approach in the offing?
We also lack the basic information disclosed when it comes to transfer of ownership of public companies. How precisely will the deal be financed? How much money do directors and executives expect to scoop and will they have any ongoing role?
Similarly, in most bids and deals there is a required breakdown of fees to the advisers. Putting to one side potential conflicts of interest of Fenchurch boss Malik Karim in the £530m LV deal, we can only guess at his firm’s payment. In takeovers and IPOs advisory fees are provided in full. After all they are being paid with shareholders cash. In LV’s case it is policyholder money. Members have a right to know.
All of this could be cleared up if LV would come clean about the particulars. Unless that happens it will be hard not to think there is skulduggery afoot.
Make your voice heard on LV
We are encouraging LV members, customers, or others, who would like to see it retain its mutual status, rather than be bought out by private equity, to write to it.
You could use the wording from the letter printed in the Daily Mail newspaper’s City pages (pictured here).
We have included the words for you to copy and paste into a letter below.
Send it to Alan Cook, Chairman of LV=, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alan Cook,
I, the undersigned, urge you to reconsider your decision to sell LV= to Bain Capital and instead maintain its mutual status.