* Saga says to raise 550 million pounds
* 25 pct free float gives $3.7 bln valuation
* To list in same FTSE sector as funeral provider
(Recasts, adds quotes, detail on company)
By Freya Berry
LONDON, April 30 Over-50s holidays to insurance
group Saga has set out plans for a 2.2 billion
pound ($3.7 billion) stock market flotation, seeking a sizeable
sale to retail investors in one of London's biggest listings so
far this year.
Saga, which has grown from its origins as a travel company
in the seaside town of Folkestone to a major insurance player,
said on Wednesday it was planning to raise a net 550 million
pounds ($927 million) to pay down debt.
The flotation - being trailed in a British TV ad campaign
fronted by former soap opera star Larry Lamb - represents the
latest in a slew of listings which have pushed proceeds from
initial share offerings up 221 percent from the same period in
2013, according to data from Thomson Reuters.
Saga's planned 550 million pounds float of 25 percent of its
equity would value the entire group at 2.2 billion pounds and
would cut its debt to around 700 million pounds.
It will also allow private equity owners Permira,
Charterhouse and CVC to begin selling down
their investment, while delivering a multi-million pound
windfall to some of its executives.
Saga said it made core earnings or EBITDA of 222.4 million
pounds in the year through January on underlying revenue of 1.2
billion. A source familiar with the deal said that it could
trade at between 18 and 20 times earnings on its launch.
The company's focus on the over-50s has led it into some
unusual areas, including regular dieting tips and a dating
service. That has made its FTSE company classification tricky.
A company's allocated sector determines its comparable
peers, which plays a part in determining analysts' views of a
company's performance and the multiples it should be trading at.
But Saga's cross-sector stance was highlighted by a decision
to list the firm in the specialized consumer services sub-sector
- putting it in the unlikely company of funeral provider Dignity
, the only other main market member of that list.
"There is clearly a debate as to whether it gets classified
in financials or whether it goes under consumer services," said
a banker at a leading City firm. "Arguably there isn't a natural
home within financials for it."
Media reports had speculated that Saga was targeting a
juicier valuation by shedding its insurance label. Direct Line
, the last major UK insurance company to float, is
trading at 11.8 times earnings, against Dignity's 18.2.
However the banker added that unlike Direct Line, Saga is
more an insurance broker than underwriter. Insurance brokers
tend to trade at far higher multiples - UK firm Jardine Lloyd
Thomson is currently at 22.7.
"It would be naïve to say that it (the multiple) isn't a
consideration, but at the end of the day I don't think the
company wants to be squeezed into financials when it doesn't fit
with the heritage of the brand," the banker said.
The company is following in the footsteps of Royal Mail
and Direct Line with a sizeable retail offering. The
size is yet to be confirmed, but Saga said private investors
would have to apply for at least 1,000 pounds of shares to be
"A substantial retail offering is central to our plans,"
said Andrew Goodsell. "Saga is high loyalty, and it's a portal
into the world of people aged over 50 in the UK."
Goodsell said 700,000 of its 2.1 million customers had
expressed an interest.
"These people behave like it's a mutual - it's their
company," said a source familiar with the deal, adding that Saga
was unique globally for its focus on the over-50s. "Brands have
focused on young people, while these people (Saga) are
unashamedly focused on the 'grey pound'".
The listing is being led by Bank of America Merrill Lynch
, Citigroup, Credit Suisse and Goldman
Sachs. JP Morgan and UBS are joint
bookrunners, while Investec is acting as joint lead
manager and Mizuho as co-lead manager.
($1 = 0.5936 British Pounds)
(Editing by Jane Merriman and David Holmes)