Saga and the AA agree to establish a new holding company

25 June 2007

It is announced today that a new company will be created, which will bring together Saga and the AA, two of the UK's strongest and most trusted brands. The transaction values the combined Group at £6.15 billion: the AA at £3.35 billion and Saga at £2.8 billion. The existing shareholders in both the AA and Saga will be the investors in the new business; this includes a substantial staff and management equity participation.

The two companies will continue to operate in their different separate fields, but are expected to benefit from the sharing of expertise, with each being able to offer its services to the customers of the other. Saga Chief Executive, Andrew Goodsell, will head up the new company, while the AA CEO, Tim Parker, has signalled his intention to pursue new business projects outside the AA, once the transaction is completed.

Completion of the transaction is subject to regulatory approval.

Andrew Goodsell said:

"These are two great brands, in different and complementary business areas, but they have many features in common. Both are affinity groups, dedicated to providing high levels of service to a clearly defined market, and to representing the interests of their members and customers. Both organisations can grow and benefit from sharing expertise and systems. We also see great opportunities to offer Saga's products to the AA's 50+ members, and the AA's products to Saga customers. This is a great deal for both brands.

"Both companies have made significant progress under private equity ownership since both were taken over in 2004. Saga has substantially built on its successful strategy of concentrating on people aged 50 and over, increasing sales and customers numbers, and broadening its product range. It has over 2.5 million customers and since 2004 has seen an 80% increase in turnover, and a 28% increase in the number of people employed delivering services to its customers at home and abroad. The AA has successfully restructured as a full stand-alone company, growing all parts of its business including its insurance broking arm, and its membership base to over 15 million. Both companies enjoy high levels of customer loyalty and satisfaction.

"We have taken a really close look and concluded that 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. Saga has an absolute focus on understanding customers and excellence in service, and this fits very well with the AA's relationship with its members. In combination we can strengthen Saga's leading position in the 50+ market, and the AA as the pre-eminent organisation for the motorist."

All press enquiries to:
Brunswick Group LLP 020 7404 5959
Sophie Fitton
Eilis Murphy

Notes to Editors

Saga's EBITDA for the year ended 31 January 2007 stood at £158.2m. This excludes discontinued operations and is on a UK GAAP basis.

The AA's EBITDA year ended 31 December 2006 stood at £272.7m. This excludes exceptional items and is on an IFRS basis.

Approximately 3,900 people work for Saga and approximately 7,200 for the AA.

Saga's business includes insurance, financial services, holidays, cruises, magazine publishing and other products all targeted at people aged 50 and over.

The AA is the UK's leading motoring organisation with around 15 million members; its businesses also include insurance broking, publishing and a driving school.

 

25 June 2007