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Saga and AA to Merge

Saga, a UK travel and insurance company targeting the over-50s, is to merge with motoring body the Automobile Association to create a Gbp6.15bn (US$12.2bn) group.

Existing shareholders in the two companies will remain as investors in the new business. These include private equity houses Permira and CVC, which bought the AA from energy group Centrica in 2004, and Charterhouse Capital Partners, which owns Saga.

It is understood that Permira and CVC will own 42.5% of the enlarged group. Charterhouse will hold 37.5%, while management and staff will own the remaining 20%.

The deal values the AA at Gbp3.35bn and Saga at Gbp2.8bn. The companies will continue to operate in their own fields, although they will cross-sell their respective products. Andrew Goodsell, Saga's chief executive, will lead the group.

The news is likely to unsettle unions, especially given the infamous raft of job cuts at the AA since it came under private equity ownership. Alistair MacLean at the AA Democratic Union, which represents some 4,500 of the company's 7,200 staff, told UK daily The Guardian that the union was concerned for the jobs of back office staff.

Nevertheless, Goodsell is confident. “Both companies have made significant progress under private equity ownership since both were taken over in 2004,” he said in a statement.

“We have taken a really close look and concluded 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.”