LIFE and pensions heavyweight Royal London, which is a big employer in Scotland, has confirmed that it has held merger talks with LV= after an initial bid for the business was snubbed.

Royal London said it has had initial, exploratory discussions with the former Liverpool Victoria after making its most recent approach to the firm in December.

It made the approach after members of LV= rejected a £530m takeover offer from private equity giant Bain Capital. Directors of LV= had decided this was more attractive than proposals made by Royal London and others in 2020.

The Bain proposal would have resulted in LV= giving up its mutual status.

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LV= said yesterday that it shares a common interest with Royal London in there being a healthy and vibrant mutual sector so that both firms can compete fairly with shareholder-owned businesses.

“We have had, and continue to have, discussions with Royal London about if and how we can co-operate to the benefit of both sets of members and the mutual sector,” said LV=’s interim chair designate Seamus Creedon.

LV= announced yesterday that Mr Creedon would take over from Alan Cook as interim chair in April. Mr Cook had indicated he would stand down after policy holders rejected Bain’s bid in December.

The 1.2 million policy holders concerned were in line to receive £100 each if the proposal was accepted.

Mr Creedon said yesterday: “Put simply, our members told us that what they viewed as the modest financial advantages of the transaction, were not worth the loss of ownership and voting rights for our million-plus members.”

“Since the vote we’ve been listening to feedback from our members that many value our brand and proud history as a mutual, and are keen to see these continue.”

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He noted that the uncertain course of the pandemic has renewed customers’ interest in insurance and income protection.

The Bain Capital proposal was unanimously recommended by LV= board members including chief executive Mark Hartigan, who has faced calls for his resignation.

However, Mr Creedon said that he would be working closely with Mr Hartigan “who has been doing an excellent job in strengthening the performance of the business”.

“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,” added Mr Creedon.

Royal London was reported to be one of 12 parties to have submitted bids for LV= before the company’s board decided to recommend the Bain proposal.

After members rejected Bain’s proposal, Royal London said in December that it had offered to enter into immediate and exclusive discussions with LV= to agree a mutual merger.

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It said then: “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. ”

Royal London has around 1,400 employees in Scotland. Many joined Royal London as a result of its acquisition of the Scottish Life and Scottish Provident businesses, in 2000 and 2008, respectively.

Sector champions say mutuals can deliver a better deal for members because they are not under the pressure to meet short-term earnings targets that firms owned by shareholders face.

However, a range of big financial services firms in Scotland have given up mutual status in recent years, including Edinburgh-based Scottish Equitable, Scottish Widows and Standard Life and Stirling-based Scottish Amicable.

Dutch-owned Aegon acquired Scottish Equitable in 1994. Prudential bought Scottish Amicable in 1998 while Lloyds swallowed up Scottish Widows the following year.

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Standard Life demutualised in 2006 following a campaign for change initiated by Australian asset manager Fred Woollard. After the group merged with Aberdeen Asset Management in 2017 its life and pensions operations and the Standard Life brand were sold to stock-exchange listed Phoenix. The remaining Standard Life Aberdeen asset management operation changed its name to abrdn last year.