Saga Raises $928 Million in IPO Priced at Bottom of Range

May 23, 2014 12:41 pm ET

(Updates closing share price in second paragraph.)

May 23 (Bloomberg) -- Saga Plc, a provider of insurance and holidays to Britain’s over-50s, raised 550 million pounds ($928 million) after selling shares at the bottom of the range used to canvass investors.

The shares were sold at 185 pence apiece, giving Saga a market value of 2.1 billion pounds, the Folkestone, England- based company said in a statement today. It initially sought as much as 245 pence. The shares erased early gains of as much as 2.2 percent to finish unchanged on their first day of trading.

Saga’s pricing comes amid waning appetite for initial public offerings in the U.K. following the underperformance of several private-equity-backed companies in the past 12 months. Infinis Energy Plc and Pets at Home Group Plc are both trading below their listing prices, while U.K. retailer Fat Face Group Ltd. canceled its planned IPO yesterday.

“Even at the bottom of the range, I didn’t like” the pricing, said George Luckraft, a fund manager at Axa Framlington in London, which manages about $76.3 billion. “They tried to soup it up as non-insurer, when so much of the business is insurance.”

Saga Executive Chairman Andrew Goodsell had said that the company will be considered by investors as part of the specialized consumer services industry, even though most of its earnings come from home and auto insurance. The proceeds from the IPO are being used to reduce debt to 700 million pounds.

Offering Oversubscribed

Charterhouse Capital Partners LLP, CVC Capital Partners Ltd. and Permira Advisers LLP had planned to reduce their stakes in the company. The firms won’t sell their existing stock at the bottom of the range, people with knowledge of the matter said yesterday.

Half of the share offer had been allocated to retail investors including Saga’s customers and was oversubscribed, according to the statement.

Citigroup Inc., Bank of America Corp., Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Cazenove and UBS AG managed the offering, along with Investec Bank Plc and Mizuho International Plc.

Charterhouse acquired Saga from its founding family in 2004, a deal that valued the company at about 1.35 billion pounds. Three years later, it teamed up with Automobile Association Ltd., owned by CVC and Permira, in a 6.2 billion- pound deal. That merger was reversed last year in preparation for a sale. The buyout firms still own the AA, as it’s known in the U.K.

--With assistance from Kiel Porter, Richard Partington and Ruth David in London.