THE vote to sell LV= to an American private equity fund has failed after not enough members voted in favour.

The board of the life, pensions and investments business had said the sale to Bain Capital was the best way of securing the brand and its jobs, including 700 at Dorset’s County Gates.

LV=’s 1.1 million members voted 69.4 per cent in favour of the deal with Bain, but 75 per cent support was needed for the bid to pass.

Following the vote, chairman Alan Cook announced he would stand down next year.

It followed a lengthy meeting in which members questioned why the company could not remain a mutual organisation owned by its members.

Royal London, which had also sought to buy LV=, swiftly offered to enter “immediate and exclusive” discussions about a merger. It said LV= members would be offered the option to become members of Royal London.

The vote followed a heated campaign against the proposed sale, with the Daily Mail urging members to vote against it and political figures from Lord Heseltine to Ed Miliband voicing their concerns.

In a statement issued shortly after the result, LV= said the result would have no impact on trading.

The turnout for the vote was 15 per cent – 174,240 of LV=’s 1.16million members.

There were 119,225 votes in favour of the sale to Bain Capital and 52,561 against.

Mr Cook said: "We are deeply appreciative of the members who took the time to vote.  Our priority has always been to put the interests of LV='s members first, and, in particular with-profits policyholders, who share in the Group's risks.

“Although 69 per cent of voting members supported the board's recommendation and voted in favour of the transaction with Bain Capital, the board is disappointed not to have achieved the outcome that we believed was in the best interests of LV= and its members."

In a further statement, LV said a “business as usual strategy” in the longer term “would not be in the best interests of our members, given the level of investment needed in our business and our declining with-profits membership base”.

It added: “The board of LV= will therefore now move swiftly to reassess its strategic options and explore alternative ways to structure a transaction that will provide the best long-term outcome for our members, as well as our business, employees and wider communities.

“The board has listened to member concerns about the loss of mutuality and so will in particular explore whether mutuality can be retained either on a standalone basis without undue risk to members, or through a merger with a larger mutual organisation. The board expects to provide an update to members as soon as it can in 2022. “

Among the other parties interested in LV= was Royal London, which offered a headline figure of £540m. LV= had argued that the bid was a poorer deal which was not turned into a final offer.

“We are aware that Royal London has made statements concerning its interest in further discussions which it has said might incorporate membership for some or all of our members and we expect, amongst other things, to explore such a possibility,” LV= said.

Mr Cook added: "The board remains committed to finding a solution to the challenges presented by a declining With-profits membership base. As we have said throughout this process, the growth and investment required to remain competitive over the long-term is not a fair or appropriate burden for our with-profits members to bear.

“This investment would delay and potentially impact the level of returns they could expect to see, given a quarter of our members are with-profits policyholders today and we expect over the next ten years this will reduce to only 10 per cent.

“Therefore, as we move into 2022, I will continue to lead the process to find a way forward that will enable us to provide the right financial outcome for all our members whilst respecting their different wishes. However, I also confirm that as soon as a way forward is agreed that I intend to step down as chair.   

 "As a board, our fundamental responsibility has always been, and will always remain, ensuring the best interests of our members. We are also deeply aware of our duty of care to LV='s people and we will continue to do everything possible to find a solution that can deliver a continuation of the LV= brand and security for our 1,300 employees.”

He said the board was providing “absolute and full support” to the work of chief executive Mark Hartigan in addressing LV=s “long-term challenges”.

"We want to reassure policyholders that this outcome will mean no changes to their policies or our ongoing commitment to the highest standards of service from LV=. I would also like to say thank you to our people, who have worked so hard to support our customers during this process and to our adviser network who we will continue to work closely with, supporting both them and their clients,” he added.

After the vote, Royal London offered “immediate and exclusive” discussions with LV= over a merger.

“We envisage that the terms of the merger would offer LV= members the option to become members of Royal London.  This proposal has been made on a different basis to the previous offer made in 2020,” it said.

“If the merger goes ahead, the bringing together of the best of both companies will result in a growing, well-capitalised, modern mutual.  It will provide UK consumers with a great customer-owned alternative to the rest of the insurance and long-term savings market, which is almost universally shareholder-owned.   

“We are confident that there will be exciting opportunities for colleagues within both Royal London and LV= as part of a larger, well-capitalised and growing mutual.  

“We hope to agree a proposal that Royal London can recommend to our members.  If we proceed, we will consult widely and provide clear information to members of both organisations about what this merger might mean for them.”

LV= reacted to Royal London’s statement by saying: “The outline proposal from Royal London is at an early stage and is subject to discussion, due diligence and detailed negotiation of financial and other terms. There can be no certainty that a transaction will be agreed. 

“The board will consider this proposal seriously and undertakes to update members as soon as practicable. In evaluating the Royal London proposal, the board will continue to have regard to members’ and stakeholders’ best interests.”