Revealed: Tory treasurer 'to make a fortune from the sale of LV to US private equity firm'
- Malik Karim is founder and chief exec of Fenchurch Advisory who are advising LV on £530 million deal
- LV bosses are backing takeover by Bain Capital
- Deal is likely to prove highly lucrative, with fees up to £5 million
A senior Tory figure looks set to make a fortune from the sale of British mutual insurer LV to US private equity predators, the Daily Mail can reveal.
Malik Karim, co-treasurer of the Conservative Party, is founder and chief executive of Fenchurch Advisory, the investment bank advising LV on the £530million deal.
LV bosses are backing the takeover by Bain Capital – and using members' funds to force it through, though they refuse to reveal the costs. There is no obligation on them to do so. If the takeover were of a public company, the fees would have to be disclosed.
The deal is likely to prove highly lucrative for Fenchurch, with City sources estimating its fees could be worth more than £5million.
Malik Karim (pictured), co-treasurer of the Conservative Party, is founder and chief executive of Fenchurch Advisory, the investment bank advising LV on the £530million deal
As boss of the discreet investment bank, Mr Karim, who stepped up to his role in the party last month, is likely to be one of the biggest beneficiaries.
According to Companies House filings, Mr Karim was also a member of Ingenious Film Partners 2 between 2006 and 2011 – a controversial film investment scheme accused by HMRC of being a means of avoiding tax.
Mr Karim said he was advised to join the scheme by his financial adviser at the time and added: 'I have made all interim payments to HMRC as requested and will settle any remaining outstanding amounts once the matter is resolved.'
Other advisers set to make money from the sale of LV include lawyers at magic circle law firm Clifford Chance and spin doctors at City PR outfit FTI Consulting. It is thought the spoils shared by bankers, lawyers, PRs and other advisers could be close to £10million. When the AA was bought by private equity firms last year for less than Bain is spending on LV, fees to third parties were around £50million. The figure for the Bain deal is shrouded in secrecy – despite the fact the fees will be paid by LV's 1.2million members.
Tory peer Baroness Altmann said: 'This is members' money being spent to change terms for members without their say-so. There should be proper disclosure rather than secrecy. Is it because LV bosses are concerned the amount would seem inappropriate?'
Shadow chancellor Rachel Reeves said the 'lack of transparency' was 'troubling', adding: 'It would be completely unacceptable if a senior Conservative were to personally profit from the potential asset-stripping [of LV]'.
It is just the latest secrecy row in the controversial buyout after chief executive Mark Hartigan was accused this week of trying to 'hoodwink' members into supporting it.
He and LV chairman Alan Cook have been criticised for failing to share details about rival bids, job security for its 1,500 staff and how much they will earn from the takeover.
Mr Hartigan is in line to make millions while Mr Cook will hang on to a £205,000-a-year chairmanship for at least two years. They have been accused of 'misleading' members with claims neither will make 'a penny' from the sale. LV has been owned by its customers since it was set up in 1843. But the sale to Bain would see it run by profit-hungry investors.
Labour MP Gareth Thomas, chairman of the cross-party group on mutuals, said it 'beggars belief' that members' money is being paid out to already 'incredibly wealthy business people'.
He added: 'It adds insult to injury that members are being asked to fork up their own hard-earned money to polish this dreadful deal and force it through.' LV has said its board 'unanimously concluded that the transaction with Bain Capital presents the most positive outcome for all members, the future of the LV business and its people'.
Mr Karim denied any potential conflicts of interest between advising LV and his Tory Party role. Fenchurch declined to comment.
Labour MP Gareth Thomas, (pictured) chairman of the cross-party group on mutuals, said it 'beggars belief' that members' money is being paid out to already 'incredibly wealthy business people'
Why will members get only £100?
By City Correspondent for the Daily Mail
The paltry £100 that LV members will get for giving up ownership of the insurer falls thousands short of some windfalls reaped in previous deals.
LV customers, who together own the firm, are being asked to accept the payment in return for giving up their rights to the business in the buyout by private equity shark Bain Capital. Many LV customers have objected to the deal on the grounds that it could see the cost of policies rise, and service plummet.
Even with-profits members, who hold more generous policies, will get only a small uplift to their eventual pay-out. It will be worth just 0.1 per cent of the value of their policy for every year they have held it. For most with-profits members, this will come to a grand total of just £52 on average.
The paltry £100 that LV members will get for giving up ownership of the insurer falls thousands short of some windfalls reaped in previous deals (file image)
Martin Shaw, chief executive of the Association of Financial Mutuals, said: 'The one-off payment of £100 is low compared to previous demutualisations.'
When Scottish Widows was demutualised and bought by Lloyds in 2000, the average windfall was £6,000. And Friends Provident handed out £1,200 in 2001.
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2021-11-12 23:26:06Z
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