£1.35bn buy-out brings an ending to sale Saga

Published on Tuesday 5 October 2004 12:13

• Company considered float on stock market

• Buy-out backed by Charterhouse

• Staff to get 1000 per year of service

SAGA, the insurance and travel company for the over-50s, has been sold in a 1.35 billion management buy-out, ending a long-running process which saw the group toy with the idea of a stock market flotation.

Staff at the Folkestone-based company are in line for a major windfall following the MBO, which has been backed by Charterhouse, the private equity outfit that owns the Madame Tussauds wax museums.

The bonus, which will see workers receive 1000 for every year of service, comes after Saga chairman Roger De Haan agreed to share some of the sale proceeds.

Saga was founded in 1951 as a single hotel business, but now has a database of around 7.6 million customers.

It employs some 2500 staff and earlier this year announced annual sales of 382.7 million and profits of 81.6m.

Chief executive Andrew Goodsell, who will remain in charge of the company, said financing for the deal was provided by Bank of Scotland, Lehman Brothers and Merrill Lynch.

Mr De Haan, whose family will pick up the bulk of the proceeds, said it was a "close-run decision" to choose a sale, but added that the deal represented the best interests of shareholders, employees and customers.

He said: "There has been enormous interest in this business from both private equity and public markets.

"It has been a very close-run decision between the two options, but we feel that a management buy-out, supported by Charterhouse, is in the best interests of the shareholders, employees and customers."

Saga first said last November that it planned a sale or a stock market listing.

Investment bank UBS, which managed the sale for Saga, sent out books to prospective bidders in July.

Several other private equity firms including BC Partners, Kohlberg Kravis Roberts and Apax had originally submitted offers.

Saga now plans to expand the take-up of its services beyond its home county of Kent where it has a bigger market penetration than in other regions.

One in four people over 50 use Saga there, compared with just one in seven in the rest of the UK.

The executive management team at Saga will be unchanged following the deal, however the stakes of Charterhouse and the management in the new company have not been disclosed. Mr Goodsell pointed out that the new ownership structure ensured continuity of service for millions of customers.

He added: "For staff it will provide a shareholding in the company and confidence in the continuing integrity of the business."

The enterprise value of the deal has been put at 1.35 billion, although the level of debt included in the figure has not been announced.

As well as current staff, company pensioners will also be entitled to receive a portion of the sale proceeds from Mr De Haan, whose father Sidney started the firm.

Over the years, Saga has expanded into insurance, financial services, magazine publishing and radio.

It enjoys near-universal brand awareness among its target market. If the group had chosen the stock market route, it would have been the UK’s biggest initial public offering so far this year.

In July, Charterhouse bought catering products manufacturer Autobar Group from the Kuwait Investment Authority.