Saga and the AA announced surprise merger plans today in a move creating a motoring and insurance giant worth £6 billion (€8.9 billion).
Saga, which specialises in insurance and travel for the over-50s, will establish a new holding company with the AA, which boasts 15 million motorists as members. Both companies are owned by private equity firms — Saga is controlled by Charterhouse while the AA is owned by Permira and CVC.
Saga will have control of the combined business although both firms, which were bought by private equity in 2004, will continue to trade separately.
The combination of the businesses, which is subject to approval from regulators, creates a company with more than 11,000 employees. Saga is aiming to target the AA's 50-plus members with its products while offering AA services to its own 2.5 million customers.
The merger deal values the combined company at £6.15 billion (€9.13 billion), with the AA worth £3.35 billion (€4.97 billion) and Saga £2.8 billion (€4.15 billion). Permira and CVC will own 42.5 per cent of the business, while Charterhouse will hold 37.5 per cent and the management and staff of both businesses the remaining 20 per cent.
AA chief executive Tim Parker, who will leave the group to pursue other interests, could net more than £40 million (€59.4 million) from his stake in the business, the Sunday Times reported yesterday.
PA