Specialist financial services provider Saga, who offer tailored services to those over 50, are planning an IPO launch before the end of May. The Financial Times reported on the morning of Wednesday 30 April that Saga said 700,000 of their 2.1million customers that were interested in becoming shareholders in the company.
The newspaper reports that the IPO will give Saga a value in the region of £3billion, with £550million being raised in cash for the business. As well as financial services, the Saga Group also offers insurance, healthcare, and travel products. Acromas Holdings Limited is Saga’s parent company.
Acromas themselves have a variety of different shareholders, being owned by staff, Charterhouse Private Equity, CVC Capital Partners, and Permira Private Equity following a merger between Saga and The AA in 2007. The IPO is the latest to be undertaken by private equity firms across Europe and represents an exit for the aforementioned stakeholders.
Saga has announced that the money raised from the IPO will be used to pay down debts. For the accounting year ending January 31 2014, Saga reported revenues of £1.2billion with an operating profit of £222million. The £3billion valuation of Saga will see it floated at around the same price as Royal Mail last year, which was the last high profile flotation in the United Kingdom. While there has been much controversy throughout the financial markets and politically as to whether Royal Mail was undervalued, it is thought the sum placed on Saga represents accurate and fair market value.
One area of controversy related to the proposed IPO is where Saga will be listed on the London Stock Exchange (LSE). Many analysts believed that the mix of Saga’s business – 72% of profits come from insurance despite financial services being marketed as their own headline service – would see it listed in this sector, but the LSE have decided Saga should be listed in the consumer services sector, but the LSE lists based on revenues rather than profits.
The executive chairman of Saga, Andrew Goodsell, called the decision “appropriate” when speaking to the FT. He added to the newspaper, “There is no lookalike for Saga in the UK, so it’s actually quite difficult to be over-specific about where is the right place [to list the business].” Consumers who are looking to become shareholders in Saga will be subject to a minimum application of £1,000. It is unlikely that Saga will be moving away from their existing successful business model, although the business is likely to continue exploring ways it can offer more diverse services and provide exceptional value to its customers.
Having a number of Saga customers as shareholders will probably ensure this remains a matter of urgency within the business. CEO of Saga Lance Batchelor told the FT, “We hope many of our customers will become shareholders.” DealMarket Blog will continue to monitor the situation regarding Saga’s IPO and will report further when the flotation happens or further details surrounding the valuation of the company are released.