News

Saga and the AA have announced surprise merger plans in a move creating a motoring and insurance giant worth £6 billion which will be based in Folkestone.

The insurance and travel company for the over-50s, will establish a new holding company with the AA, which has 15 million motorists as members.

Both companies are owned by private equity firms - Saga is controlled by Charterhouse while the AA is owned by Permira and CVC.

Saga will have control of the combined business although both firms, which were bought by private equity in 2004, will continue to trade separately.

The combination of the businesses, which is subject to approval from regulators, creates a company with more than 11,000 employees.

Saga is aiming to target the AA's 50-plus members with its products while offering AA services to its own 2.5 million customers.

Chief executive Andrew Goodsell, who will head up the combined company, said the two brands were complementary.

The new holding company, which has yet to be named, will be based in Folkestone at Saga's headquarters.

The merger deal values the combined company at £6.15 billion, with the AA worth £3.35 billion and Saga £2.8 billion.

Permira and CVC will own 42.5 per cent of the business, while Charterhouse will hold 37.5 per cent and the management and staff of both businesses the remaining 20 per cent.

AA chief executive Tim Parker, who will leave the group to pursue other interests, could net more than £40 million from his stake in the business.