FSA and EU give green light to £6bn deal

The £6bn merger of financial services giant Saga and motoring group the AA is set to complete next week after receiving approval from regulators.

The transaction will complete on Tuesday following approval from the European Commission and the Financial Services Authority this week, Insurance Times can reveal.

The merger has taken nearly three months to complete after it was announced at the end of June.

The companies have had to fend of speculation that the financing of the deal had run into trouble after reports that the banks backing the deal had been unable to persuade other banks to act as sub-underwriters.

A spokesman for Saga said: “We have received regulatory clearance. The transaction will complete on 18 September.”

He said the details of the new management structure would be announced next week or the beginning of the following week.

The merger values Saga, the over-50s insurance group owned by private equity group Charterhouse, at about £2.8bn. The AA, which is owned by CVC and Permira, is valued at £3.35bn.

The level of debt has been increased from a combined £2.8bn to about £4.8bn as part of the deal, which will see a new holding company formed into which Saga and the AA will be injected.

Charterhouse will be the biggest shareholder with a 38% stake, with Permira and CVC holding a combined 43%. Management and staff will have the remainder.

The three private equity firms are expected to make about £2.6bn profit from their investments.

Saga employs 3,900 and has 2.5m customers. The AA has 15m motorists as members.

The deal will see the two companies will continue to operate in their separate fields but will cross sell to each other’s customer base.

The EU said this week in a statement: “The Commission’s examination of the proposed transaction showed that there is an overlap between the AA and Saga for the provision of breakdown services in the UK.

“Given the very modest presence of Saga on the market for breakdown services, the Commission concluded that the proposed transaction would not risk impeding effective competition on this market.”