Royal London is pursuing a takeover of its fellow financial services provider, LV=, in a deal that would create a “mutual champion” with nearly 10m customers across the UK.
Sky News has learnt that the two groups are in detailed negotiations about a tie-up.
City sources said this weekend that a transaction would bring together the pensions, life insurance and asset management businesses of Royal London and LV=, ending the latter’s 177-year status as an independent business.
LV=’s board is understood to have met this week to discuss the progress of a strategic review that got under way in June, with a decision about a deal with Royal London potentially being reached within days.
Insiders said the two parties were not yet in exclusive discussions, with Bain Capital, the private equity backer of motor insurer esure also said to be keen on acquiring LV=.
The precise valuation of the group previously known as Liverpool Victoria is unclear, although people close to LV= said it would be in excess of £500m but “substantially less” than £1bn.
A transaction would bolster Royal London’s status as the UK’s biggest mutual life, pensions and investment company, with £139bn of assets under management.
By comparison, LV= manages assets worth £14bn, and has been a substantially smaller business since concluding the sale of its general insurance operations to Germany’s Allianz at the end of last year.
Royal London would finance the purchase using the proceeds of a £600m debt-raising it undertook late last year, according to people close to the situation.
LV= used to sponsor cricket’s County Championship
Industry analysts pointed to the strategic logic of a tie-up between Royal London and LV= given the overlap between their products and their mutual status.
If a deal between them can be struck, it could lead to the LV= brand disappearing from the life and pensions market, one said.
Between them, the two groups employ close to 6,000 people, more than two-thirds of whom work for Royal London.
Under its new management team – led by chairman Kevin Parry and chief executive Barry O’Dwyer, who joined a year ago – Royal London has identified an opportunity to absorb smaller financial mutuals with strained balance sheets.
In June, it announced that it would take on the Police Mutual, a friendly society which represents police officers across the UK.
One insider described Royal London’s approach as being akin to that of Nationwide, Britain’s biggest building society, which merged with several smaller peers during the 2008 banking crisis.
LV=’s 1.1m members are expected to be asked to vote on any transaction recommended by its board, which is chaired by Alan Cook.
A deal would not close until next year.
A person close to it insisted that it could yet decide against endorsing a deal which led to the loss of its independence and instead seek a joint venture or another form of partnership.
At the beginning of this year, LV= ended its long friendly society status by becoming a company limited by guarantee – a transition that it said would allow its board to act more effectively on behalf of members.
Fenchurch Advisory Partners, which is part of the investment bank Natixis, is advising LV= on its talks with potential buyers.
Other suitors for the business are reported to have included Phoenix Group Holdings, the listed insurer, and Cinven, the buyout firm.
Royal London, LV= and Bain Capital all declined to comment.