RUTH SUNDERLAND: How to thwart the LV private equity sharks


Most private equity deals are presented to customers and staff as a fait accompli. In the case of the recent takeover of supermarket chain Morrisons by US buyout barons Clayton, Dubilier & Rice, the decision lay in the hands of big City and international investors.

They made up their minds pretty much entirely based on price, with little or no regard for small private shareholders, shoppers, suppliers, taxpayers and employees, all groups with a stake in Morrisons’ future.

Fortunately, there is a chance to write a different script at mutual insurance company LV, whose bosses are trying to bulldozer through a sale to another US private equity player, Bain Capital.

Stop the deal: LV is owned by its members and they have the power to stop its private equity takeover because they have a vote

LV is owned by its members and they have the power to send Bain packing because they have a vote on the deal. I absolutely urge all eligible LV customers to use that vote – or be sold down the river.

In this case, the biggest sharks are probably not the usual villains, the private equity buyers themselves, but the bosses at LV, who are so single-mindedly intent on selling out. 

Chief executive Mark Hartigan has peddled the line that he will not receive any personal gains as a result of the deal. Strictly speaking, this may be correct.

But if, as Hartigan hopes, he is kept on in the job, he is likely to be given an equity stake that could be super-lucrative depending on performance.

He only arrived at the firm at the start of last year and he must have barely have got his feet under the desk before embarking on preparations for a sale.

By December, when the Bain Capital deal was announced, LV said it had received 12 formal bids.

This is not the behaviour of a leader with a deep attachment to mutual values.

It is more akin to the antics of the carpet-baggers who, in the 1990s, joined mutual insurers and building societies in the hope of a quick demutualisation gain.

LV top brass are betting on the apathy of their own customers in order to achieve their ends.

Under the mutual’s rules, at least half the members must turn out for the vote on the sale for it to win a green light.

Management know this is extremely unlikely, so are asking for a vote to scrap the requirement for the 50 per cent turnout, as well as a poll on the sale itself.

If they get their way with this gerrymandering, it means a £530million deal affecting more than 1m policyholders, could be waved through by a tiny minority of members.

Members have it in their power to thwart this deeply undesirable outcome, which would disenfranchise the many for the benefit of the few, utterly flouting all principles of mutuality.

If principles are not enough, think of the cash. LV is offering £101million – or a mere £100 per member – in return for surrendering their ownership, plus another sum to be added to future payouts for eligible with-profits policyholders, taking the total to £212million. 

This is less than the £237million LV has returned to its members in mutual bonuses since they were introduced a decade ago.

These derisory offers are an insult to LV members. If Hartigan and Co succeed, it will embolden more opportunists to pillage our mutual building societies and insurers. 

LV policyholders have a rare chance to send out a powerful message to private equity, and to the bosses who are so eager to sell out. 

So if you are among them, make your voice heard. Don’t let millionaire executives and private equity jackals have it all their own way. Cast your vote.

Cash machines

Co-operative Bank, the self-styled ethical lender, suffered for many years as a consequence of the undermining of its core principles by flawed senior managers, including former chairman Paul Flowers, the drug-taking clergyman nicknamed the Crystal Methodist, who dragged mutual values into disrepute.

Nearly a decade on from its downfall, it is in good financial health again.

Its hedge fund owners, most of whom did not envisage being long-term investors in a bank, let alone a politically correct one, are interested in an exit route.

The Co-op’s approach to Sabadell, the Spanish parent of TSB, about a possible merger could have paved the way to an exit for the hedgies in a £65billion stock market float, but in the event has come to nothing.

Not so long ago, however, Co-op Bank was itself being targeted by private equity predators and it remains an easy morsel.

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. 

Read more at DailyMail.co.uk