Members of insurance giant LV= have failed to vote through a deal to sell the business to US private equity giant Bain Capital.
Around 1.1 million policyholders voted following a general meeting at the company’s Bournemouth office with 69.4% approving the plans for the £530 million deal.
But the deal failed as the board needed to secure 75% for it to pass.
After the vote the company said LV will “move swiftly” to reassess its strategic options and explore alternative ways to look to sell the business.
Immediately after the meeting, rival mutual Royal London said it has offered to enter into immediate and exclusive discussions with LV to agree a mutual merger.
It said: “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.”
LV said it would “explore such a possibility”.
Prior to the vote, the board took questions from members and reassured them that if the vote did not pass the company would remain viable.
However, after the vote, chairman Alan Cook said he was disappointed and would be stepping down.
He 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% 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.”
Bain said it would respect the vote. It added: “Whilst approximately 70% of LV=’s members voted for our proposal, we respect this outcome is not enough for our transaction to proceed.
“It remains crucial that members are looked after and protected.
“We have always wanted LV= to flourish and become a leading company in the sector, that offers more consumer choice and creates more jobs.”
During the meeting, it became clear that members who asked questions were disappointed that LV would lose its mutual status after 178 years and many of the comments were focused on the topic.
But the board said: “The benefits of remaining a mutual was outweighed by the plans for the deal.”
Chief executive Mark Hartigan insisted that without the deal cash from members would be needed to invest, which would be unfair as many would not see the benefit in the long term.
He said: “The issue here is for sustainable and long-term capital and we don’t have access to that. It’s in the estate and it would be unfair for the board to take that capital from the members.”
The boss added: “The issue is how can we access capital when we can’t borrow any more and it’s unfair to take it from our members.”
Questions were also asked about the reported £43 million the proposed takeover cost, which was explained away with high legal and advisor costs.
The board was also asked about why it rejected a bid from rival mutual Royal London, which was one of 12 companies involved in the auction process.
It was revealed that Royal London did not make a final bid for LV and Mr Hartigan said Bain’s bid was higher.
He added: “Royal London was proposing to leave material liabilities (and) higher uncertain costs.”
Other members questioned whether the board would be in line for big bonuses for pushing through the deal but the company said there were no bonuses due specifically in relation to the deal.