Plans for a £1bn float or sale of Saga, the holidays and insurance business, have been marred by a falling out between two of the De Haan brothers - members of the family who founded the group that targets the over-50s.
Plans for a £1bn float or sale of Saga, the holidays and insurance business, have been marred by a falling out between two of the De Haan brothers members of the family who founded the group that targets the over-50s.
The row centres on a so-called "anti-embarrassment" clause written into the terms of a share sale agreed between Peter De Haan and his older brother Roger.
Both men have hired leading City advisers to handle their interests in the dispute. Roger is understood to have retained NM Rothschild, one of the City's smartest banks, while Peter has been advised by Close Brothers, specialists in corporate restructurings. The row has not been resolved and could yet impinge on any sale of the company.
Saga has been one of the most successful service companies of the past two decades, specialising in selling insurance and holidays to the over-50s. Its most recent accounts filed at Companies House show that turnover at the group hit £383m in the year to the end of January 2004 with pre-tax profits of £64m. Operating profits were £69m, leading some analysts to value Saga at closer to £1.5bn than original estimates of £1bn.
Roger De Haan, the controlling shareholder in the business, has expanded the group rapidly and has diversified into radio and magazines.
The success of Saga has brought enormous wealth to the De Haan family members, particularly Roger who stands to collect £1bn or more from a sale of the business, after which he intends to retire.
However, relations have soured between himself and Peter. Talks at resolving the financial dispute over the share sale agreement are understood to have ended in February or March with the disagreement still simmering between the pair. The outstanding issues are by no means resolved and could still prove a thorn in Saga's stated plans to float on the stock market or seek a sale to another operator or private equity group.
While the spat is unlikely to derail completely the sale plans, it could still prove an unwelcome distraction for Roger, his advisers and potential investors in Saga.
The seeds of the dispute were sown in July 2002 when Peter agreed to sell his and his family's remaining interests in Saga to Roger, who then became the sole shareholder in the company. Peter and his children's interests were held in various trusts. A previous sale by Peter in 1999 had begun the process of handing control to Roger and the July 2002 sale involved the sale of a remaining 25 per cent stake.
As part of the deal Roger agreed to a clause which said that if Saga was subsequently sold, the trusts in question would receive a special dividend which analysts believe has a value of about £150m
But the clause has a time limit. It runs out at the end of July and if no sale or flotation is forthcoming before then, the special dividend agreement will lapse. Once Roger had decided to sell Saga a move that was announced last November he approached Peter with an offer to buy-out the anti-embarrassment clause.
But his apparent act of fraternal generosity was not well received by Peter nor by the trustees of his children's trusts. The amount being offered by Roger is understood to have been a fraction of the special dividend's value. An initial approach from Roger was pitched at about £1m. That was rejected. A second offer was forthcoming from Roger of closer to £10m but this was still deemed to be too low by Peter's camp, even though after the end of next month he and his children look like gaining nothing from any sale of Saga.
A spokeswoman for Roger De Haan declined to comment on whether negotiations had taken place between the brothers. Roger has announced a "dual track" process for the sale of Saga.
But detailed work on that process has not yet begun, it emerged yesterday, and is not expected to start until August, with a decision on whether the company will be floated or sold to a trade buyer or private equity fund expected in October.
Roger De Haan's advisers were adamant that the matter was closed and that there was "no story" in relation to the sale of Peter's shares. However, some members of Peter's camp, who spoke in private to The Independent, believe the matter is not necessarily over.
There is a twist to the tale. When Peter agreed to sell his remaining interests in Saga in July 2002 he and his family did in fact retain an interest in the company. This is held through three classes of non-voting shares, including preference shares. These preference shares entitle Peter to receive dividends amounting to £31.2m up until 2008. If these dividends are not paid, the preference shares are given voting rights.
However, in any restructuring of Saga's share capital, which is likely in the event of a stock market flotation, Peter's interests could still play a role. His co-operation may well be needed. One person familiar with Peter's situation said Peter's interests could still prove awkward for Roger.
That said, Roger's camp was last night adamant that what happens to Saga was entirely up to him and Peter would have no bearing whatsoever on the outcome.
The dispute is a sorry development in the long history of Saga, which was founded by Roger and Peter's father, Sidney, in 1951. A third brother, David, who is the eldest, emigrated to Australia in the early 1970s and still operates tours to the country for Saga customers.
Peter is a former finance director of Saga while Roger has worked in the business for nearly 40 years.
He has never planned to hand over the running of the business to any of his eight children, four sons and four daughters from two marriages, none of whom work for Saga.
However, Roger and his two brothers did work for their father, who began the business in a 12-bedroom hotel in Folkestone. Instead of closing the hotel during the autumn and winter, Sidney decided to offer cut price breaks to pensioners for £6.50-a-week full board.
From these humble beginnings, Saga has branched out into home insurance for the over-50s a highly profitable line of business as many older people spend a lot of time at home and represent a low-risk group to cover.
Saga offers motor insurance as well and is also moving into savings products. Financial services now account for more than 80 per cent of Saga's business although it also has a booming media division.
Saga magazine, which has featured such well-known over-50s as Mick Jagger on its front cover, is now one of the country's biggest selling magazines with more than 1 million subscribers. Saga also has a radio station and claims around 2 million customers in total.
What is certain is that Saga will not change hands before the end of July, leaving Peter's anti-embarrassment clause valueless. However, whether that is an end to this saga about Saga remains to be seen.Reuse content