Former Saga boss to take part in £150m capital raise

Over-50s specialist Saga said on Tuesday that it plans to raise £150m in a placing, with former Boss Roger De Haan set to take part, as it looks to strengthen its balance sheet and improve liquidity amid the Covid-19 outbreak and having recently rejected a takeover approach.

The company is at the advanced stage of the capital raise, which it plans to launch on or around 10 September with its interim results.

Saga’s former chief executive and chairman Roger De Haan plans to invest up to £100m in the equity raise. In addition, he will join the board and become non-executive chairman, taking over from Patrick O'Sullivan once it has completed.

"The board unanimously considers that the proposed equity raise will support the execution of its reinvigorated strategy under its strengthened management team, which it believes will return Saga to sustainable growth and lead to the restoration of significant shareholder value," the company said.

Saga said it had considered a number of options to put the company on a stronger financial footing and also recently evaluated and rejected an unsolicited and "highly conditional" 33p indicative approach from a consortium of two US financial investors.

Saga also said recent trading has been in line with expectations and consistent with the commentary in its AGM trading statement in June.

"The board is encouraged by the progress made since the start of the year and by the resilience of the business through a time of unprecedented challenge and change and believes the current Covid-19 crisis highlights the strength of the Saga brand, its diversified business model and its direct relationship with its customers."

At 1240 BST, the shares were up 24% at 16.84p.

William Ryder, equity analyst at Hargreaves Lansdown, said: "It’s not surprising Saga is looking for new money. In some ways, it would be hard to design a company more susceptible to a pandemic than the group’s travel operations - and Saga didn’t start the year in the best of health either.

"The new money will dilute current shareholders, but we doubt there are too many long term investors left. The shares have fallen heavily over the last few years, and the pandemic only threatened to administer the coup de grace. We suspect the shareholder base now comprises mostly vestigial holdings that don’t merit selling and more speculative investors hoping for a miraculous recovery. Neither is likely to mind being diluted, especially with a seasoned former CEO returning to the leadership team with fresh cash."

Russ Mould, investment director at AJ Bell, said: "The decision by its former owner Sir Roger de Haan to invest £100m at a big premium to a depressed share price has created hope that the company can claw its way out of a hole partly of its own making but exacerbated by the coronavirus crisis."

He said it should prove a better outcome for investors than the 33p takeover offer recently tabled.

"De Haan is invested both financially and emotionally in the business, given it was founded by his father more than 70 years ago. His decision to return to the board as chairman should be taken positively by the market.

"Saga remains in a very tricky place, it has no certainty on when normal service will resume in the travel business, and it will still be saddled with debt, partly associated with its ill-timed launch of two purpose-built cruise ships.

"If Saga can steer a course through the current choppy waters one can understand why the proposition might have some merit, given demographic trends should create an increasingly large pool of prospective customers.

"However, like many businesses, Saga still doesn’t know exactly how a post-Covid future will look."