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AA close to takeover at a fraction of float price six years ago

Written by on 23/11/2020

The AA’s board is set to recommend a takeover which values shares in the debt-laden roadside recovery company at a fraction of their price when it floated on the stock market six years ago.

Under the deal, Towerbrook Capital and Warburg Pincus will pay 35p a share for the business, which dates back to 1905.

That is 86% less than their 250p price when the AA was floated in 2014.

Rick Haythornthwaite
Image: Rick Haythornthwaite has been approached to chair the AA should the takeover succeed

At that time, the company’s total share value stood at about £1.4bn.

They now look set to be swallowed up for just £218m, though the new owners are also taking on a debt pile of £2.65bn and will invest £380m to refinance a tranche of that debt.

The AA, which has more than three million members and once styled itself as “Britain’s fourth emergency service”, is engaged in “advanced discussions” with the consortium ahead of a Tuesday deadline to agree a deal.

Monday’s announcement was a disappointment for some investors after reports that the takeover price could be higher, sending shares down nearly 2%.

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Still, the valuation is about 40% up on its level on August before details of a possible offer first emerged.

The company said: “The board believes that the company needs a more sustainable capital structure and requires a significant amount of additional new equity in order to reduce the group’s indebtedness and to fund future growth.

“The board, having considered carefully the viability of a range of alternative potential debt and equity refinancing options together with its financial advisers, has indicated to the consortium that it would be willing to recommend a cash offer on the terms of the proposal.

“Accordingly, the company is engaged in advanced discussions with the consortium in relation to the possible offer.”

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May 2020: AA sees ‘definite pick-up’ in breakdown call-outs

In September, the AA reported a 38% fall in pre-tax profits to £26m for the six months to the end of July as membership numbers fell at a time when road usage dropped due to the COVID-19 lockdown.

Over the weekend, Sky News revealed that former Centrica chairman Rick Haythornthwaite had been approached about chairing the AA if the bid is successful.

 Sky News

© Sky News 2020

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