Saga boss Patrick O’Sullivan meets U.S. activist investor that bought 5% stake in crunch talks showdown
- Saga boss Patrick O’Sullivan has held crunch talks with Elliott Advisors
- US activist snapped up the stake after Saga shares fell 37% in profit warning
- Elliott is understood to want Saga to split its travel and insurance businesses
The chairman of over-50s firm Saga has confronted a powerful activist investor who is trying to break up the company.
The Mail on Sunday can reveal that Saga boss Patrick O’Sullivan has held crunch talks with Elliott Advisors since it bought a 5 per cent stake in the company a month ago.
The US activist – renowned for its ruthless boardroom tactics – snapped up the stake after a major profit warning made Saga’s shares plunge 37 per cent.
Analysts are not convinced that a break-up of Saga’s travel and insurance divisions would be a good move for the over-50s company
Elliott is understood to want Saga to split its travel and insurance businesses.
The hedge fund followed a similar strategy with hospitality giant Whitbread last year, building up a 6 per cent stake before pressuring the company to sell Costa Coffee to Coca-Cola.
However, analysts are not convinced that a break-up would be a good move for Saga.
Edward Morris, from JP Morgan, pointed out that Saga benefits from selling multiple products under one brand. He warned that the travel and insurance divisions may be less valuable as individual companies.
He said: ‘The Saga brand is somewhat unique and while its effectiveness has diminished in recent years we do continue to believe that [the strong brand] allows the company to earn superior margins to the market average on each side of its business.’
Saga’s share price dived in April after chief executive Lance Batchelor said the company had to cut margins to keep up with competitors. He also offered to fix premiums for three years. Elliott and Saga declined to comment.