ALEX BRUMMER: LV deal fails odor test – this should be the ultimate guide for regulators when lifetime savings are at stake
Any expectation that Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), might find a way to put sand in the wheels of insurer LV’s top management plan to sell itself to the private equity firm Bain Capital was sorely wiped out. . A four-page update from the FCA launches the white flag.
The city regulator says he is not empowered by Parliament to consider “the form of ownership” of the purchaser. The FCA also lacked direct enforcement powers over London Capital & Finance, where oversight was outside the so-called scope.
That hasn’t stopped former chief executive Andrew Bailey and his colleagues from being criticized for misconduct. A more intrusive enforcement executive could at the very least make his views known on private equity ownership of a former mutual with 1.16 million members.
Any expectation that Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), might find a way to put sand in the wheels of insurer LV’s top management plan to sell itself to the private equity firm Bain Capital was wiped out.
The Competition and Markets Authority had no direct power to intervene in the takeover of Morrisons by Clayton, Dubilier & Rice. He took the opportunity to explain to MPs the risks, including the potential dangers of debt financing.
These have become very evident at Asda. One unfortunate aspect of President Alan Cook and CEO Mark Hartigan’s efforts to privatize the mutual is the plan to bring it to fruition by changing the voting rules.
LV asks the court to modify its statutes to facilitate the passage of the agreement. Currently, it takes 75% of at least 50% of the membership to approve a deal. This is meant to keep rascals at bay and, in the best mutual tradition, to ensure members are heard. Under a proposed rule change, it would be possible for 75% of a small minority of members to approve the deal.
The court would make the final decision, but it would be good to think that the FCA, which is ultimately an advocate of consumer interests, was prepared to come to court to defend the original voting structure.
The LV case is complex and, with good reason, the FCA asks LV to step up its communications with policyholders
The LV case is complex, and the FCA rightly demands that LV intensify its communications with policyholders. It also states that it will hold âsenior managementâ accountable for any subsequent issues if the interests of policyholders are compromised.
It actually requires Hartigan and his management team to mark their own homework in a setup in which they should have direct involvement. None of this passes the odor test. This should be the ultimate guide for regulators when lifelong savings are at stake.
Make your voice heard on LV
We encourage LV members, clients or others, who would like it to retain its mutual status, rather than being bought out by private equity, to write to it.
You can use the wording of the letter printed in the City pages of the Daily Mail newspaper (pictured here).
We’ve included the words you can copy and paste into a letter below.
Send it to Alan Cook, Chairman of LV =, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alain Cook,
I, the undersigned, urge you to reconsider your decision to sell LV = to Bain Capital and instead maintain its status as a must have.
No one can accuse Matt Molding, founder and executive chairman of The Hut Group (THG), of ignoring his critics. In a series of swift moves, sparked by a leaked day in capital markets earlier this month, he has sought to clean up governance. Molding has ditched its share of gold, dissolved a Â£ 100million personal loan deal with Barclays and is looking to strengthen its independent presence on the board. Recklessly, the first new non-executive is not independent at all, as Andreas Hansson is a senior executive at Softbank, a key investor in THG. The search for a non-executive chairman has started but it will not be easy.
The personalities and industrialists of Credible City will be wary of catching a falling knife. The belief, shared in these pages, that a cleanup of governance is the answer to molding problems is yet to be proven. The most important questions seem to relate to the business model. On paper, at least the core asset Ingenuity, THG’s open-architecture technology platform, is performing wonderfully, with revenue rising 131pc year-over-year.
There is still no clear data on how this number is reached due to the mystery of B2B pricing. The earnings may look good, but investors don’t think it’s robust, hence the latest 20% drop in stocks. What an embarrassment for Britain’s uneven market for new floats.
After UK carriers assault proposals to increase landing fees at Heathrow, highly paid managing director John Holland-Kaye calls on customers and businesses to show sympathy to his greedy sovereign wealth fund and owners of private equity, claiming a halving of its value. The idea that the decline in value from Â£ 20bn to Â£ 10bn is anything but transitory caused by the pandemic is a fiction. The smart way to restore income is to avoid abusing users with higher fees.