Charterhouse set for big return on Saga

Saga, the UK leisure group owned by Charterhouse Capital Partners, is considering a £2.5 billion flotation on the London stock market, which could yield a lucrative return on the buyout firm’s initial investment.

UK-based private equity group Charterhouse Capital Partners could be set for a substantial return on its investment in Saga, after the UK leisure group revealed that it is considering a £2.5 billion (€3.7 billion; $4.9 billion) return to the stock market.

Saga has appointed Close Brothers to advise it on a London listing at some point in the second half of 2007, which is likely to value the business at about £2.5 billion. This would represent a sizeable gain for Charterhouse, which originally backed a £1.35 billion management buyout of the business in October 2004.

The buyout firm is likely to make a return of more than three times its initial investment in Saga, which provides travel, leisure and insurance services to affluent over-50s and has over 2 million customers. Charterhouse invested £500 million of equity in the original deal, which it has already received back after a refinancing last year, and still owns 80 percent of the business. Saga currently has debts of about £1 billion, which will have to be paid back before any proceeds are realised.

Chief executive Andrew Goodsell’s 8 percent stake would be worth about £200 million following a flotation. This would make him one of the richest people in the UK, though he would remain some distance behind Saga’s previous chief executive Roger de Haan, the son of the founder, who netted a reported £1.1 billion from the sale to Charterhouse in 2004. The company’s current staff and pensioners also received a £1,000 windfall as part of that deal.

Saga has been a good advertisement for private equity ownership, according to Goodsell – the firm currently employs 28% more staff than it did before the management buyout in 2004. “Saga has made excellent progress in the period since the management buyout,” he added. “We are well ahead of expectations, and consistently outperforming our business plans.”