City regulator refuses to stop LV= members’ vote on sale to Bain Capital

Lawyers for two members of UK mutual sought delay to controversial takeover by US private equity firm

Last modified on Thu 9 Dec 2021 12.42 EST

The City regulator has refused to intervene in a deal to sell the mutual LV= to a US private equity firm, despite an 11th-hour plea by lawyers to try to delay Friday’s vote by members of the mutual to approve the controversial takeover.

The law firm Leigh Day, which is working on behalf of two LV= members leading objections to the takeover, met with officials from the Financial Conduct Authority on Thursday in an attempt to put the brakes on a £530m deal that would end the firm’s member-owned status and put it in the hands of Bain Capital.

The lawyers have been urging the FCA to withdraw a statement from October in which the regulator said it would not object to either the takeover or plans to demutualise LV=. They have raised concerns about how the mutual’s leadership disseminated information about bids from Bain and rivals, including fellow mutual Royal London, as well as a lack of member consultation.

Leigh Day said on Thursday that while the meeting with the City regulator was helpful, “regrettably the FCA declined to withdraw their ‘non-objection letter’ before tomorrow’s vote”.

However, the law firm’s clients are now preparing to raise their opposition at a court hearing on 20 December that would formalise the Bain deal. “If LV= members vote to approve the transaction and the scheme of arrangement [on Friday] then our clients intend to voice their objections at the sanctions hearing,” Leigh Day said.

The decision is expected to go to the wire, with LV=members able to change any votes previously cast on the day of the special meeting on Friday. However, Leigh Day has questioned whether this has been made clear enough to members, and raised this concern with the FCA.

The law firm had raised concerns about a “material lack of procedural fairness” about the way information about bids from Bain and rival suitors were made available to members after the LV= board backed the offer from the private equity firm in December 2020.

Leigh Day are also concerned over a lack of consultation over plans to demutualise LV=, and say there has been “confusing and contradictory” information about the business’s financial health.

LV= has said it is “very aware of our responsibility to communicate clearly with members” and has “directly responded to a significant number of written questions”. It added that any objections raised by the two members were “based on a misunderstanding of the transaction and its implications”.

The FCA said: “LV members have the opportunity to vote on whether this takeover should happen. Our role, under law, is to ensure that customers are treated fairly and that there is no material adverse impact on them should the transaction go ahead. We have challenged the firm to make sure this happens.”

LV=’s 1.1 million members will be asked to cast two ballots on the takeover on Friday afternoon, the first of which ask whether members approve of the deal. However, that vote will only require approval from 75% of members who show up to vote, with no quorum – meaning there is not a minimum threshold on the number of members who are required to cast their ballot to ensure it is valid.

The second vote – which will only take place if the first vote passes – will ask members to agree to scrap a rule requiring at least 50% of all its 1.1 million members to take part in any vote that could result in demutualising the business, and take power out of the hands of its members.

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