ALEX BRUMMER: A takeover by Royal London makes more sense for LV than selling to a private equity firm
Britain’s mutual financial groups are a much denuded sector. The board of LV, the former Liverpool Victoria, founded 175 years ago, has some big decisions to make when it meets today.
Having put itself up for sale, the insurance group with 1.28m policyholders has two offers on the table.
One from competitor Royal London and a second from Boston-based private equity firm Bain Capital, which as the owner of Esure already has a stake in UK insurance.
Having put itself up for sale, insurance group LV has two offers on the table – one from competitor Royal London and a second from Boston-based private equity firm Bain Capital
The precise terms of both offers are obscure but both should mean that LV policyholders will receive one of those windfall payments that were so common when much of the building society movement switched camps in the 1990s by becoming public companies, with disastrous consequences when they were brought down by the 2007-08 financial crisis.
Private equity has its sights set on the UK at present where a combination of Brexit jitters and poor performance in handling Covid-19 has turned Britain into a bargain basement.
Among the offers out there are a £3billion private-equity-backed bid for G4S by Canada’s GardaWorld, a TDR Capital backed bid for Asda by billionaire brothers Mohsin and Zuber Issa and a private equity challenge led by former Aviva boss Mark Wilson to crash the Saga rights issue.
But fund managers with a liking for cash to boost lagging performances have been far too ready to accept the debt-backed private equity shilling.
Even if Bain Capital sits at the respectable end of the private equity spectrum, LV directors should remember the mutual heritage and support the Royal London offer.
Under the leadership of Barry O’Dwyer, veteran of the Pru and Standard Life, Royal London is bulking up life and pensions operations, recently absorbing Police Mutual. Adding LV to its £100billion of assets and 9m policyholders would be a useful bump.
The model for private equity is to load up on debt and take out costs. Such ownership should be anathema for life and pensions companies which need to be tightly focused on capital, regulation and the best returns for policyholders.
Once-disparaged endowment policies still have a big role to play in the savings market.
Royal London also has an enviable record of taking the lead on governance issues. LV chief executive Mark Hartigan and his board should be in no doubt that Royal London and staying mutual is the way to go.
The Government has shown enthusiasm for bailing out hospitality with summer’s ‘Eat Out To Help Out’ and VAT reductions. It has been totally remiss in the failure to look after aerospace.
It may have enjoyed a small triumph by forcing Richard Branson directly to confront Virgin Atlantic’s problems, but they are not going to go away.
The virtual closure of North Atlantic routes is a disaster for Virgin and a much bigger problem for BA.
It is really galling that both Germany and France, in a challenge to EU rules on subsidies, have pumped billions into Lufthansa, Air France and the aerospace supply chain.
The US Congress is embarking on a second bailout for US carriers with a proposal of an additional $25billion (£20billion) of funding when the current support package runs out at the end of September.
In the UK there is the embarrassing sight of Rolls-Royce, dependent on flying hours for cash flow, going to the chanceries of Kuwait and Singapore in support of a £2.5billion fundraising.
There seems little awareness in Whitehall that aerospace is a high-tech area where the UK has competitive advantage.
Allowing ownership, command and control to drift overseas – even if outside investors look benign – should not be an option.
Rolls sits at the pinnacle of a supply chain, which is vital to the UK’s post-Brexit future and deserves domestic support.
Mike Coupe would have ‘been in the money’ by now had his plot to merge Sainsbury’s with Asda not been blocked.
Instead, the former Sainsbury’s chief executive is choosing the path of public service in a medical emergency, as the person in charge of bringing test, track and trace up to scratch.
His nominal boss will be Dido Harding, a former underling when Coupe was climbing to the very top of the Sainsbury’s tree.
The arrival of Coupe, architect of Sainsbury’s Argos merger and push into online, means a grown-up is now in charge.