AA poised to accept £218m private equity takeover offer
The AA has told two private equity groups it would be willing to accept a proposed 35p-a-share offer for the struggling motor group, the company said in a statement.
The two private equity firms would also invest £380m to help reduce its debt pile of £2.6bn as part of the deal.
Shares fell almost three per cent to 31.7p on the news.
The roadside recovery firm is in crunch talks with Warburg Pincus and Towerbrook Capital Partners over the terms of a possible takeover deal, ahead of a Tuesday deadline set by the UK’s Takeover Panel.
“Having considered carefully the viability of a range of alternative potential debt and equity refinancing options… [the AA’s board] has indicated to the consortium that it would be willing to recommend” such an offer, the AA said in a statement.
“The company is engaged in advanced discussions with the consortium in relation to the possible offer.”
The firm, which was founded in 1905 as the Automobile Association, has 3,000 patrol vehicles and provides roadside assistance to 12m members.
The £380m private equity injection would be used to support the refinancing of £541m of loan notes maturing in July 2022 and £372m of notes maturing in January 2022.
The AA has has felt the weight of a heavy debt burden for the past few years. It was owned by the private equity groups CVC and Permira until they its stock market flotation in 2014 with debts of £3bn.
About £913m of its debt falls due for repayment in the next two years.
The company made £107m in pre-tax profits in the year to 31 January, with its balance sheet likely to be significantly affected by a drop in road use during the pandemic.
The private equity groups’ proposal would allow some AA shareholders to keep a stake in the firm once it is taken private, the AA announced today.