The insurer LV = will be bought by an offshore company in Jersey if the members accept an agreement orchestrated by the American private equity firm Bain Capital which would cause it to lose its historic mutual status.
Bain set up a Jersey-based company called BCC Blake Bidco Ltd to carry out the takeover, according to correspondence between an independent expert and Gareth Thomas, Labor MP and shadow minister for international trade.
Jersey companies and other tax havens are regularly used by private equity firms to take advantage of their 0% corporate tax rate and lower disclosure requirements. It is understood that the new owner of LV = will file UK income tax returns and be subject to UK tax.
Thomas wrote to Bain’s chief executive overseeing the deal, Matt Popoli, on Tuesday to raise a series of concerns about the opaque structure. In the letter, seen by the Guardian, he asked if unidentified investors would fund the takeover and who would sit on the board of directors of the new company.
LV =, formerly known as Liverpool Victoria, was founded in 1843 to fund the burial costs of the poor in Liverpool. Over the next 178 years, it grew to become one of the UK’s largest insurers, offering life insurance and pensions. It is also one of the last large open mutuals.
LV = announced it was for sale in June 2020, and in October 2020 it revealed exclusive talks with Bain. LV = argues that it needs external capital to invest in technology upgrades or deal with foreclosure by larger insurers.
The buyout plan which is to be supported by 75% of the members has proved controversial, with criticism from Thomas and some of LV’s member-clients of what they see as relatively meager compensation for the loss of mutual status. . Bain is committed to maintaining LV’s operations in Bournemouth, Exeter and Hitchin.
Thomas said: With all the justified frustration of the members regarding the lack of openness of the bosses of LV =, this suggests that Bain does not explain who is really behind their plans, where their money is coming from and especially who will be sitting. on the board of directors of the new private company.
And their decision to found the new company in Jersey calls into question their real intention to retain current levels of staff and the three offices. With half the voting period on why Bain won’t just explain who is funding their offer and who will truly control it if the demutualization continues.
Bains’ trade-in vehicle was formed in December 2020, according to Jersey Company records. It is registered at Sir Walter Raleigh House in St Helier, Jersey, an address of Maples Group, a company specializing in the formation of offshore funds. The address appeared in the Paradise Papers, a wealth of documents leaked by Appleby, another offshore law firm.
A spokeswoman for Bain Capital said the company would review the letter and respond to it in due course. She added that the letter contained unspecified false and misleading assumptions. LV = declined to comment.
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