Saga puts retail investor at heart of London float

SAGA, the over-50s holidays-to-insurance provider, yesterday unveiled plans for the biggest flotation in London this year, as a stampede of silver haired savers registered to snap up shares in the listing.

The business, which was founded by east end hotelier Sidney De Haan in 1950, said it would raise £550m in an initial public offering of shares from institutional and retail investors.

The money will be used to cut its net debt to £700m, from £1.25bn. The float could value the company at about £2.2bn, or £3bn with debt.

Nearly 700,000 Saga customers have expressed interest in buying shares, with each shareholder due a free loyalty share for every 20 they buy – if they keep them one year.

This tops the 690,000 people applying to buy shares in the £3.3bn float of Royal Mail last autumn

Four new directors will also join to beef up the board, which is led by executive chairman Andrew Goodsell and former Dominos boss and current Saga chief executive Lance Batchelor.

“There are few businesses like Saga – it is a brand-led services company, an affinity brand with a loyal customer base which is the largest-growing demographic in the UK. It is am attractive space for investors,” Goodsell said in an interview with City A.M.

The former business development boss, who has toured the City meeting scores of potential investors to drum up support for the float in recent weeks, is targeting a dividend payout of up to 50 per cent its earnings.

A prospectus with more details on the company is due to be published next week.

The float marks the beginning of the end of the company’s ownership under its private equity backers Charterhouse, CVC Capital and Permira, and the start of a renewed push by the firm to develop services for the UK’s rapidly ageing population.

Charterhouse bought the company in 2004 from the De Haan family and subsequently merged it with roadside recovery company AA – owned by CVC and Permira – to form a holding company called Acromas.

The £6.2bn deal loaded the company with £4.8bn of bank debt, the majority of which was due to start maturing around 2015.

“If you have private equity backers, which we have had, you reach a point when they need to recycle their funds,” Goodsell said. “We also have a very good relationship with a number of banks who, over the years, have helped and supported the business. This is a bit of payback time for them, we need to provide something for those who helped us.”

The over-50s demographic is the fastest growing in the country, and with the end to compulsory annuity purchases spelled out in this year’s Budget, Saga is eyeing a push into the wealth management space.

“We lobbied the government hard over pensions and are very pleased with the changes. With products for people to invest their pensions in, there are no brands in that space so it is a great opportunity for us.

“We are also making a big play in health care, that will be a substantial share of the business going forward. We are the largest provider of domiciliary care by a country mile – keeping people healthy at home is the way forward.”

Joining the board are incoming Carillion chairman Philip Green, ex-Bupa boss Ray King and Royal Mail non-executive director Orna Ni-Chionna and YSC’s Gareth Williams.

The company will list in the specialised consumer sector of the FTSE alongside funeral firm Dignity.


1. £2.2BN
Market cap of the company once it lists next month

2. £550m
Being raised by listing shares on the London stock market

3. 700,000
Customers have registered their interest in buying Saga shares


1. Saga was founded after the second world war by the owner of the Rhodesia Hotel in Folkestone, Sidney De Haan, an ex-serviceman who started the business by selling holiday packages to elderly people. Saga was originally called the Old People’s Travel Bureau and offered pensioners out-of-season seaside holidays to Folkestone for just £6.

2. Saga today has 2.1m customers, with each person owning roughly 2.7 Saga-branded products each. The company has a group marketing database containing 10.4m names and 8.4m households across the UK. This covers one in every two houses occupied by someone over the age of 50, and nearly 60 per cent of affluent elderly households. The Saga database also contains over 1bn pieces of individual data.

3. Around 55 per cent of Saga’s revenues comes from consumer and leisure products like holidays and travel, with a further 36 per cent coming from home and car insurance – but this has led some to question whether it is an insurer or consumer company. The FTSE has classified Saga as a specialised consumer company, putting it in league with funeral providers like Dignity. The company is expected to generate about £1.2bn of revenues this year from sales, which represents annual growth of 4.7 per cent. It anticipates underlying earnings of about £222m.

4. Andrew Goodsell is executive chairman of the company and spent 22 years working at Saga before being appointed chief executive and chairman in 2004. He originally started out as a business development manager at the company in 1992. Former Domino’s Pizza boss Lance Batchelor joined the group in March and has a strong background in the consumer sector, having worked in marketing roles at Amazon, Vodafone and Tesco.

5. Saga’s retail share offering to customers will be spurred on by the reportedly high level of engagement and satisfaction its customers have with the brand. Around 88 per cent of Saga customers are repeat buyers of its products, and the Saga brand achieves 96 per cent prompted brand recognition among over-50s, according to a YouGov poll last year.


1 Hume-Kendall completed the London marathon last month, raising money for Action Medical Research

2 He is currently chairman of global corporate and investment banking for Europe, middle east and Africa at Bank of America Merrill Lynch

3 Hume-Kendall previously worked on the placing of shares in St James’s Place last year and was previously nominated for City A.M.’s dealmaker of the year award

Also advising...
Citi is sole sponsor, BoA Merrill Lynch, Goldman Sachs and Credit Suisse are joint global co-ordinator and bookrunners, JP Morgan Cazenove and UBS are joint bookrunners, Investec Bank is joint lead manager, and Mizuho International is co-lead manager. STJ Advisors and Solid Solutions are also on the deal