Private Equity Bidders Line Up for Saga
UBS, the investment bank auctioning Saga for about �1bn ($1.8bn), is thought to have narrowed the field interested in acquiring the insurance, holiday and media group to five private equity bidders.
Kohlberg Kravis Roberts, BC Partners and Charterhouse have made it through to the next round, together with two joint approaches, one from Apax Partners and Cinven and another from Candover, JP Morgan Partners and Hg Capital.
Another candidate may be in the running but UBS has reduced the field from at least 10 private equity bidders earlier this month.
One banker who has been monitoring the process said most of the bids were bunched about �1.2bn, which he said was justified by the financial projections in the market.
UBS has been mandated to run a "dual track" process in tandem with running the auction it is also exploring a flotation.
Prospects for a stock market listing were enhanced last week when Admiral, the motor insurer, said its float was on track for the second half of September. Admiral may be worth up to �680m.
But both companies could fall victim to nervous conditions for new issues and there is uncertainty about whether the IPO market will re-ignite after the summer recess. "The state of the IPO market is horrendous," one private equity chief said last week.
One of the bidders for Saga said the group's mix of businesses, which command different ratings through the cycle, meant it would be priced at a discount to Admiral if the float route was chosen. "Is the �900m expected enterprise value therefore quite optimistic?"
Bankers have also expressed nervousness about Saga's decision this year to end its motor insurance underwriting contract with Groupama of France, taking on the underwriting risk itself.
"Is it an underwriter or a broker? They are two different valuation models.
"Institutions look for track record and on underwriting it is not there," one banker said.
Saga is aware of a change in risk profile but it believes investors will be attracted to its brand strength.
"This is a business that has a direct exposure to the only demographic that is growing," a person close to Saga said.
"There are 7.5m people over 50 and they are a rich demographic. The fundamentals of this business for a float or sale could not be better."
He added that even if the private equity auction collapsed, a flotation could still be achieved.
"Institutions have different criteria and they will pay for future growth today. Private equity values cash more highly," he said.
|
