Stick or twist ...but all LV members MUST vote

IT’S decision time for the 1.16million members of mutual Liverpool Victoria (LV). Stick or twist? Twist as in vote for the demutualisation of the 178-year-old protection, investment and with-profits business – and hand ownership to American private equity giant Bain Capital?

Or stick, reject the £530million offer and hope (and pray) that a white knight (such as Royal London) will come in with a better proposal?

Certainly, the mood music among readers of The Mail on Sunday who are members suggests that LV’s board will struggle to get the required 75 per cent approval (from voting members) for the Bain deal to proceed.

So far, not one reader has expressed support for demutualisation.

In contrast, many say they have already cast their vote against the deal, either by post or online. The deadline for voting is December 10 – two days earlier for postal voting.

It’s not difficult to see why members are underwhelmed by the Bain offer.

For a start, demutualisation bonuses of £100 – admittedly more in the case of LV’s 297,000 with-profits customers – hardly seem generous when compared to the windfalls customers have received when other businesses (insurers and building societies) have shed their mutual status.

For example, when mutual Scottish Widows was snapped up by Lloyds Bank in 2000, its members received average payouts of some £6,000.

The paucity of the windfalls on offer fuels the suspicion that Bain is trying to get LV on the cheap – a view not helped by LV’s board burying its head in the sand for most of this year and refusing to explain cogently why Bain’s offer is in the best interests of members and employees.

Refusing to release details of the massive fees that a clutch of City advisers are receiving for overseeing the deal has not helped either – resulting in a maelstrom of criticism from the media, politicians and financial experts.

Nor has LV’s silence on the rewards that key board members Alan Cook (chairman and former Post Office boss) and Mark Hartigan (chief executive) will receive if the takeover proceeds. It is only in the past couple of weeks that Hartigan – and for that matter Bain itself – have come out fighting (what on earth were their media advisers doing previously to justify their fees?)

On Friday, Hartigan told me that the Bain offer was the best of 12 bids that the board had received – and that all along in deciding the best way forward for LV, he had been driven by a ‘moral duty to do the best for members’.

He admitted that in retrospect he should have done more earlier to explain to members (and the media) the reasons for demutualisation. But he insisted that staying mutual was not an option: ‘All roads led to demutualisation,’ he said.

The Bain offer, he added, would allow LV to invest in its business, shore up its employee pension schemes, build a new IT system fit for purpose, and keep open its operations in Bournemouth, Exeter and Hitchin.

If members vote down the deal – as now seems likely – Hartigan said the board would have to start the whole sales process again in the hope of flushing out another buyer. But he stressed it was unlikely that a rival would be prepared to offer more than £530million.

AS FOR Bain, he said its deal represented its ‘very best price’, indicating that it was unlikely that the private equity company would be prepared to offer more money to members to get a vote through.

If a replacement buyer could not be found, Hartigan warned that LV could close to new business.

If next month’s vote is for sticking rather than twisting, Hartigan’s and Cook’s positions on LV’s board will become untenable. That, of course, is of no concern to members (the duo have hardly covered themselves in glory).

For the record, Hartigan told me he has recently had sleepless nights worrying over whether the Bain deal would get over the line.

While rejecting Bain’s demutualisation proposal smells like the right thing to do, it is not without risk.

But what ALL LV’s members must do is vote.