Saga to invite customers to apply for shares in £900m flotation

Saga formally announced plans for a £900m-plus float yesterday and said it would contact 3 million households inviting them to register for a mini-prospectus in what could be one of the biggest retail share offers for years.

Saga formally announced plans for a £900m-plus float yesterday and said it would contact 3 million households inviting them to register for a mini-prospectus in what could be one of the biggest retail share offers for years.

But customers and members of the public who register an interest could yet face disappointment. Saga is still exploring a sale to a private equity fund. Roger de Haan, the owner of Saga and a son of its founder, is using the levels of interest expressed by customers and institutions in a float to compare the likely value of an initial public offering (IPO) with that of a private equity sale.

The most recent similar example was the 1999 float of William Hill, which was pulled the day before it was due to announce its IPO price after accepting a last minute offer from Nomura. Andrew Goodsell, Saga's chief executive, yesterday defended the tactics.

"We are not doing this to create competitive tension [among private equity bidders]. We are writing to 3 million people in the next couple of days ... because there was a feeling that a float had a real opportunity of delivering significant shareholder value. We are trying very hard to manage customers' expectations by telling customers up-front what we are doing. There is a prospect of telling people we may not be floating."

A dedicated phone line and website for registering for a mini prospectus have been set up and Saga customers will be given preferential allocations if demand is strong. Saga said it would not raise new money in the float. It said 155,000 customers had already indicated they might be willing to buy shares worth between £356m and £777m.

Saga's insurance business accounts for 80 per cent of its £85.7m group operating profit. Holidays generate £199m of its £383m turnover, compared with £165m of insurance sales, but travel margins are lower.

Mr Goodsell said: "The population of the UK aged over 50 is about 20 million people and by 2021 more than 50 per cent of the adult population will be aged over 50.... As a group, the over 50s have become increasingly adventurous."

Saga is likely to pay a progressive dividend policy. Stuart Howard, the finance director, said: "As a business with our own customers as shareholders, they will be taking cash off deposit and buying shares and will be expecting good returns. Saga generates cash. We will have the freedom to do that."