Saga/AA To Merge After Proposals Given Green Light

by Stewart Douglas

Story link: Saga/AA To Merge After Proposals Given Green Light

The merger of Saga financial services and the AA is on track to be completed next week after having received the green light from competition authorities, which would see the brands establishing a cross-selling platform for insurance and breakdown cover packages.

The deal, worth an estimated £6 billion (approximately $12 billion) will be concluded through the early part of next week after the FSA and the European Commission both agreed to allow the move to take place.

With the AA providing breakdown recovery services and insurance, and Saga offering a range of products tailored to an older market, the European Commission said that there was an overlap between the products both companies had to offer, and the move would not make for an uncompetitive marketplace.

The move ran into difficulties amidst speculation that the banks financing the move were unable to find sub-underwriters given the current market risk as a result of global liquidity problems. As a result, the proposals have taken three months to come to fruition, including the time taken to be approved by the relevant authorities.

Saga, specialising in insurance products for 50 year old and over customers, is currently valued at around £2.8 billion (around $5.6 billion), whilst the AA which specialises in motor related financial services was priced at £3.4 billion, with a reach of over 15 million motorists across the UK.

The move will maintain both companies within their current target markets under the same branding, but will increase the level of synergy and cross promotion between product offerings, allowing both companies to benefit from the customer base of the other.

The companies will become subsidiaries of a larger holding company, which will be set up in order to facilitate the move and will see the private equity companies behind both brands making a healthy profit on the deal.