AA and Saga announce merger

Saga, the travel and financial services company for the over 50s, is to merge with motoring giant the AA in a deal valuing the combined company at £6.15bn. The two brands will remain, although Saga chief executive Andrew Goodsell, who will head the combined company, says that products will be cross-sold.

The deal is also likely to lead to a winner-takes-all consolidation of the new company’s media planning and buying business. Carat handles media for Saga, while PHD is the AA’s media agency.

Goodsell says of the merger: “We have taken a really close look and concluded that there are significant advantages in combining Saga and the AA’s experience, expertise, systems and negotiating power, while maintaining their separate and very distinct brands and personalities.”

Private equity firms Permira and CVC bought the AA for £1.7bn in 2004 before cutting 3,000 jobs – equivalent to a quarter of the workforce. Saga was bought by private equity firm Charterhouse for £1.35bn in 2005. Following the deal, Permira and CVC will own 42.5% of the business, while Charterhouse will hold 37.5% and the management and staff of both businesses the remaining 20%.

Saga was founded in 1951 as a single hotel in Folkestone, but now has a database of 7.6 million customers and more than 2,500 staff.

The AA, which is 106 years old this year, is the UK’s largest breakdown provider. AA managers said the 2004 takeover resulted in improved performance and efficiency at the firm, although the deal saw the business take on more than £1.3bn in debt. AA chief executive Tim Parker will leave the group following the Saga deal.

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