Merger talks have ended between LV= and Royal London, two months after LV= members rejected a plan to sell the business to US private investor Bain Capital.
In a press statement released today (9 February), LV= said: “It has become clear to LV= that our different mutual models mean such a merger would not be in the best interests of LV= members. As a result, talks between the two companies have now ceased.”
Interim chair Seamus Creedon added: “We thank Royal London for its engagement and we look forward to operating alongside it as part of a vibrant mutual sector. The strength of LV=’s business performance over the past 18 months combined with its operational progress has strengthened the board’s belief in, and commitment to, the continuation of our status as an independent mutual.
“We have heard what our members have said about the importance of mutuality and the continuation of the LV= brand. We continue to maintain our strong capital position, are trading well and building a successful future for LV=, its members, employees and wider communities. We will shortly update our members on our business strategy and will continue to engage with them over the coming weeks and months.”
The news follows a turbulent 2021 for LV=, which prompted an outcry over its move to sell the business to Bain, a move which would have led to its demutualisation. It was reported that a rival £540m offer, made last year by Royal London, had been rejected at the time in favour of Bain’s £530m deal.
Discussing the breakdown of the talks, Royal London CEO Barry O’Dwyer said today: “Our offer to preserve LV=’s mutuality through a merger with Royal London was based on an understanding that LV= did not have a viable future as an independent company.”
“For Royal London’s customers and members, nothing changes. We remain committed to delivering great value products, backed up by market-leading customer service. We look forward to sharing a substantial level of profits with our eligible customers in April, as we normally do.”
On Monday 7 February, LV= announced the departure of chair Alan Cook, who had been criticised for his role in the attempted Bain deal. Mr Creedon, who replaces him on an interim basis, is a non-executive director at the mutual and will lead the process to reshape the board.
Three other non-executives will also leave the board: David Barral (who ends his six-year term on 7 March), Alison Hutchinson and Luke Savage. Ms Hutchinson had been criticised for sitting on the board of Yorkshire Building Society while backing the demutualisation of LV=.
CEO Mark Hartigan, who also drew harsh comment for his role in the Bain deal, will stay in his role. Mr Creedon said: “The board takes full responsibility for the unsuccessful transaction, which Mark actively advocated on its behalf, and my colleagues and I have high confidence in him and his team.”
Labour/Co-op MP Gareth Thomas – who, as chair of the All Party Parliamentary Group on Mutuals, played a leading role in opposing the Bain deal – said: “I welcome the imminent departure of Mr Cook and public confirmation of talks with Royal London. Mr Hartigan needs to confirm he will be leaving too.”
He added: “The members of LV= deserve a chairman now committed to being open and transparent about the future of the business they’ve owned for almost 200 years.”
Mr Thomas said the failure of the Royal London talks, “just days after announcing, them begs many questions, including why these talks have been shrouded in secrecy and why, considering their new commitment to mutuality, they ever pursued the ill-fated sell off to Bain in the first place?”
He accused the LV= board of a “continued opaque approach”, and called for more transparency to back up its “recently stated commitment to mutuality”.
“LV= members must have the right to know the strategy and priorities of the board,” added Mr Thomas. “Regulators must be also much more assertive in assuring this transparency for LV=’s members.
“To demonstrate they are truly committed to mutuality the key will be in getting a chief executive who has worked in the mutual sector and understands their ethos.”
Update, 14 February
In a message to members on 11 February, Mr Creedon said the attempt to sell to Bain had been influenced by the uncertainty of the Covid-19 pandemic.
“During the voting process, both the board and Mark [Hartigan] expected that the LV= brand, business and people would be lost if the vote did not pass,” wrote Mr Creedon. “However, in light of the improving business performance over the last 18 months, the board has been able to be more considered in assessment of its future options, including that the proposed merger offer with another mutual would not be beneficial for our members.
“LV= is in a very different place to where it was 18 months ago.”
Mr Creedon said the mutual had strengthened its leadership team with a new chief financial officer, chief operating officer and chief risk officer. He also said the product range had been improved, and progress was being made on the organisation’s IT transformation, alongside effective management of expenses and cost base.
“The LV= board has reviewed the options in front of it,” he added. “The board believes in the continuation of LV=’s status as an independent mutual brand and the opportunities this presents for our members, customers, employees and wider communities has strengthened.”
He said the mutual would be arranging a series of member webinars in the coming weeks “so we can share more detail on our plans for a sustainable mutual future for LV=.”