Car owners of AA, Britain's largest motoring organization, are arranging meetings with banks to map out a £4.5 billion departure strategy.
Britain's leading breakdown recovery service, the AA, is reportedly pondering over a strategic shift towards a sale or public listing next year, potentially valuing the company at over £4 billion. According to our sources, specialized bankers JP Morgan and Rothschild are expected to be appointed to review the AA's strategic options following an upturn in its financial and operating performance.
The AA, boasting more than 16 million customers, including 3.3 million individual members, is jointly owned by private equity firms Towerbrook Capital Partners, Warburg Pincus, and Stonepeak. While an imminent corporate transaction does not seem likely, the impending appointment of advisers signifies renewed confidence among its shareholders, given the business's four-year streak of customer, revenue, and earnings growth.
Possible options for a strategic review may encompass an outright sale, a public listing, or the disposal of a further minority stake. Recently, Stonepeak invested £450 million into the company, valuing it at approximately £4 billion at the time of the transaction. This valuation, coupled with the company's growth, suggests a future transaction would scarcely fall below £4.5 billion, according to financial experts.
However, the AA continues to grapple with a sizeable debt burden, with net debt amounting to £1.9 billion as of the most recent financial reports. The company, which operates a significant insurance division as well as its roadside recovery services, aims to gradually pay down this debt as profitability improves.
Throughout its 25-year history, the AA has been under the ownership of several entities. Centrica, the owner of British Gas, acquired it for £1.1 billion in 1999. It was later sold to CVC Capital Partners and Permira in 2004 for £1.75 billion, where it remained for a decade before listing on the London Stock Exchange in 2014. The subsequent years saw its shares plummeting, eventually being taken private at little over 15% of its initial listing value.
Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team. The aim was to modernize the company and adapt to the evolving automotive landscape. These strategic considerations could play a part in the company's decision regarding a potential sale or public listing.
A spokesman for the AA declined to comment on the matter.
The strategic options under review by the AA, due to its impressive growth and recent investment of £450 million, are expected to either involve an outright sale, a public listing, or the disposal of a further minority stake, potentially valuing the company at over £4.5 billion. Despite a significant debt burden of £1.9 billion, the company aims to gradually pay this off as its profitability improves, a factor that may influence its decision on a potential sale or public listing in the future.
