Permira, CVC, Charterhouse to float Saga

The IPO should raise £550m, which will be used to pay down debt.

Saga, a UK-based travel and insurance group owned by Permira, CVC Capital Partners and Charterhouse Capital Partners, has announced its intention to list on the London Stock Exchange. 

The IPO is likely to value the business at approximately £3 billion, according to a source familiar with the matter. It will raise net proceeds of about £550 million, which will be used to reduce net debt to approximately £700 million.

UK-based Charterhouse, CVC and Permira are expected to sell a portion of their stakes in the business. All three firms declined to comment beyond the statement.

UK-based Saga offers a range of products and services primarily for the over-50s, including insurance and holidays. The business has achieved underlying EBITDA margins of 18 percent over the last three financial years, while approximately 400,000 net new names have been added to the group’s marketing database each year on average from 31 January 2009 to 31 January 2014.

The IPO comes after Saga refinanced its debt earlier this month, putting in place new term loan facilities of £1.25 billion and a multi-currency revolving credit facility of £150 million.

The listing will allow the three buyout firms to start exiting the business. In July 2007, Permira and CVC combined UK motoring company the Automobile Association with Charterhouse-owned Saga, in a deal that valued the combined group at £6.15 billion.

The deal valued the AA at £3.35 billion and Saga at £2.8 billion. CVC and Permira took stakes of just under 20 percent in the business, with Charterhouse taking 37.5 percent and the companies’ management and staff holding the remainder.

Charterhouse bought Saga for about £1.35 billion in October 2004, writing an equity cheque of about £500 million, PEI reported at the time. It recouped this investment after a refinancing in 2006, while retaining an 80 percent stake.

It is understood Permira invested in Saga using its Permira Fund III, a €4.95 billion 2003-vintage, while CVC invested in Saga using its CVC European Equity Partners IV, a €6 billion vehicle raised in 2005.

The private equity consortium, which put the businesses together under a holding company called Acromas, initially planned to sell the businesses as a whole, but decided to break them up last year as they felt it would be easier to sell them separately.

This move was criticised by UK-based union GMB last December. It hosted a protest against the planned IPO outside Permira’s London office, claiming that if the listing went ahead the firms would “have stripped a total of £5.5 billion from the two organizations since 2004”.

“Most of Acromas’s current £4 billion debt will be left in the AA and securitised against annual fees paid by AA’s motorist members for breakdown cover,” it said in a statement. AA currently has approximately £3.2 billion of debt, according to a source familiar with the matter.

CVC and Permira have owned AA since 2004. Permira and CVC both invested about £240 million of equity in the original acquisition of the AA. They then took out £260 million each following a refinancing in March 2006, PEI reported at the time.

The ownership of AA caused a stir back in 2007. CVC and Permira were called to appear at the UK’s Treasury Select Committee hearing into private equity.