LV takeover facing mounting backlash: Bosses plot rule change to force the deal through
The planned takeover of LV by American buyout barons faces a mounting backlash after it emerged bosses are plotting a controversial rule change to force the deal through.
The historic insurer – which was set up 1843 and was formerly called Liverpool Victoria – has agreed to be sold to US private equity group Bain Capital for £530m.
The deal would bring an end to mutual status for one of the country’s oldest financial firms and leave it in the hands of foreign owners. But the takeover must be backed by LV members who own the company – and bosses are planning a change in the rules to secure the deal, which has been branded ‘reprehensible’ by critics.
Full of hot air: Chairman Alan Cook and an LV= car insurance ad
CHAIRMAN BACK IN SPOTLIGHT AFTER POST OFFICE SCANDAL
The sale of LV to Bain Capital has thrust the mutual’s chairman Alan Cook into the spotlight once again.
The 67-year-old was boss of the Post Office from 2006 to 2010, when the prosecution of sub-postmasters began. Under his watch the Horizon computer system was introduced.
This system wrongly suggested money was going missing from post offices and led management to pursue the prosecutions even though doubts had been raised about its reliability.
It led to 39 sub-postmasters wrongfully being found guilty of theft, in what a judge who overturned the verdicts in April described as one of the greatest miscarriages of justice.
His tenure at LV began in 2017. He insists Bain’s is the best option on the table. But his judgement has been questioned before – he insisted the Post Office Horizon system was ‘robust and fit for purpose’.
He has never apologised.
After the convictions were quashed, Gareth Thomas MP said: ‘Cook has serious questions to answer.’
The rules state any takeover must be voted on by at least 50 per cent of members with 75 per cent approval to pass. But chairman Alan Cook accepted it was ‘frankly impossible’ that so many members would vote on the deal.
So bosses will ask those members who do take part to also vote to support dropping the requirement for a 50 per cent turnout.
The move was condemned by industry experts and politicians who said the company is ‘moving the goalposts’ because it cannot win under the current rules.
Mutual advocacy organisation Mutuo condemned it as a ‘terrible idea’ that does not represent members’ interests. It said the voter turnout threshold is high specifically to discourage a deal like this.
Managing partner Peter Hunt told the Mail: ‘LV know they can’t win a straight demutualisation vote according to their own rules, so they want to move the goalposts to make their asset-stripping plan work.
‘The rule is designed to be high because demutualisation is always in the interest of a small number of people, not the majority.
‘They will cart off the loot that’s been made over centuries and they haven’t contributed to it.
‘There’s so much money to be made out of this. I wouldn’t be surprised if some of the leaders walked away with shares worth £10m individually.’
Lord Heseltine said the flood of sales of British companies over seas was ‘depressing’. He said: ‘The process is doubly reprehensible when it has to involve changing the law to override the express intentions of those who vested the business.’
MPs blasted the deal and demanded Cook and chief executive Mark Hartigan reveal how they will benefit from the sale.
Gareth Thomas, chairman of the All Party Parliamentary Group for Mutuals, said the pair have refused to be ‘transparent’ about the takeover.
He said: ‘Some might say the fact the board is already determined to go to court to force through a change to the rules of their own articles of association speaks volumes about the motives behind their controversial deal with Bain Capital.’
Group member Kevin Hollinrake MP called the rule change ‘disgraceful’ and said LV bosses are trying to pursue demutualisation ‘by the back door’.
He said: ‘The business case for it [demutualisation] hasn’t really been established and the suspicion is it’s in the interest of the executives rather than the interests of members.
‘It seems they are manipulating the situation to bring about their desired outcome that is not necessarily the best outcome for members.’
Labour peer Lord Sikka said LV members should write to directors to oppose the rule change.
But Cook said the board believes the sale is in the best interest of LV members.
The company said the takeover by Bain protected jobs, offered an independent future for the brand and a good financial outcome for members.
A spokesman said: ‘Given the circumstances we face, the board firmly believes this transaction is the right thing to do for our members, our business and our people.’