Royal London has confirmed it will enter into exclusive talks about merging with LV= following the collapse of Bain Capital’s deal to takeover of the mutual.
At a special general meeting this afternoon only 69% of LV= members who voted were in favour of the proposed deal – below the 75% required for the £530m sale to proceed and end the firm’s mutual status.
Just 174,240 (15%) of LV=’s 1.16 million members participated in the vote with 119,225 members voting in favour and 52,561 members voting against the proposed sale.
In the wake of the’s vote, LV= chairman Alan Cook revealed that while he will continue to lead the process of finding a way forward for the insurer, as soon as this is achieved he will step down as chairman.
Royal London renews interest
A month ago, it emerged that Royal London had contacted LV= asking that it engage in takeover talks which would allow it to retain its mutual status, a claim LV=’s chairman Alan Cook denied.
And following the result of today’s vote, Royal London issued a statement in which it confirmed it wanted to enter into immediate and exclusive discussions with LV= to agree a merger which would allow LV= customers the opportunity to have their life savings protected and invested by a mutual.
Royal London added that it envisaged the terms of the merger would offer LV= members the option to become members of Royal London.
The firm further revealed that today’s proposal had been made on a different basis to the previous offer made in 2020 and that it hoped to agree a proposal that could be recommended to its members.
Royal London added that if the deal proceeded, it would consult widely and provide clear information to members of both organisations about what this merger might mean for them, adding there was no certainty the discussions would result in a transaction.
It noted that a further announcement would be made as and when appropriate.
For its part, LV= confirmed it received an unsolicited preliminary merger proposal from Royal London on 8 December 2021. The proposal, it added, now included the possibility of continued mutuality and was conditional on exclusive discussions.
LV= added that the outline proposal from Royal London was at an early stage and was subject to discussion, due diligence and detailed negotiation of financial and other terms.
It too added there was no certainty a transaction would be agreed but said its board would consider Royal London’s proposal seriously and would update members as soon as practicable.
Chairman to depart
Commenting on today’s developments and announcing plans to depart, LV= chairman Alan Cook said the firm’s board remained committed to finding a solution to the challenges presented by a declining with-profits membership base.
“As we have said throughout this process, the growth and investment required to remain competitive over the long-term is not a fair or appropriate burden for our with-profits members to bear,” he said.
“This investment would delay and potentially impact the level of returns they could expect to see, given a quarter of our members are with-profits policyholders today and we expect over the next ten years this will reduce to only 10%.
“Therefore, as we move into 2022, I will continue to lead the process to find a way forward that will enable us to provide the right financial outcome for all our members whilst respecting their different wishes. However, I also confirm that as soon as a way forward is agreed that I intend to step down as chair.”
Cook added that the board’s fundamental responsibility had always been and would always remain as ensuring the best interests of its members. And that it was aware of the duty of care for brand and the firm’s 1,300 employees.
“The business is trading strongly and remains appropriately capitalised,” he continued.
“As well as driving an improved trading performance, our CEO, Mark Hartigan, has delivered on the board’s requirements throughout this strategic process.
“The board continues to provide its absolute and full support to his ongoing work to address the long term challenges facing LV=.”