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Two of Britain's best known brands - Saga, the insurance and leisure company for the over 50s, and the Automobile Association - are to merge, creating a financial services and motoring giant valued at £6.15 billion ($16 billion).
The enlarged group, which will employ around 11,000 staff, is likely to be listed on the stock exchange in three to five years.
The surprise move brings together the three private equity houses that have separately owned Saga and the AA since 2004. Charterhouse, the owners of Saga, will hold a 37.5 per cent stake in the new holding company, while CVC and Permira, which own the AA, will keep 42.5 per cent.
This gives private equity firms an 80 per stake in the combined company. Management and staff at the two businesses will hold the rest.
More than 1000 Saga staff will be able to cash in 75 per cent of their shares in the company after the deal, giving them a payout of almost £8000 each. Saga chief executive Andrew Goodsell, who will take over the helm at the combined group which has yet to be named, said both companies would continue to operate in their separate fields. Tim Parker, head of the AA, is to leave to pursue other interests.
Initially a holiday business, Saga now derives 80 per cent of turnover from its financial services arm.
The £1.7 billion buyout of the AA in 2004 led to 3500 jobs being slashed, triggering a backlash from unions.
Paul Maloney, national secretary for the GMB, said yesterday the union estimated that Parker would walk away from the AA with £80 million after this deal.
"This shows the extent to which we have entered into a casino economy," he said.
"This money was made on the back of 3500 sacked workers, cuts in the pay of the call centre staff, the elongation of the working day for the patrols and a decline in service to customers."
He said the GMB wanted to talk to Saga about reversing the job cuts and improving working conditions at the AA.
- INDEPENDENT
