9:27 am, November 25, 2020
The debt-ridden AA has finally received a formal offer for the business after two days of feverish City action.
An announcement was made today (Nov 25) via the London Stock Exchange to say that investors would receive 35p a share from TowerBrook Capital and Warburg Pincus.
The offer values the motoring organisation at £219m.
The private equity firms were yesterday given until 5pm today to make an offer or walk away, following an earlier announcement that the AA, which is understood to have some £2.65bn of debt, had received a non-binding offer of £218m from them on Monday (Nov 23).
AA chairman John Leach said the board would recommend the deal to shareholders, adding that it was in their best interests.
The TowerBrook Capital and Warburg Pincus consortium have formed a company called Bidco for the takeover, and said the deal would see them drive the AA’s business forward to ‘better serve its customers and capitalise on its considerable strengths’.
It will also see the AA leave the stock market.
TowerBrook and Warburg said previously they would invest £380m into paying down huge debts racked up by the AA’s former owners, who put it in a disastrous stock market listing in 2014.
It initially listed on the London Stock Exchange at 250p a share, with armchair investors keen to buy into a household name, but after jumping to 450p the price soon plummeted.
The previous owners landed the firm with too much debt and the price never recovered – it started today (Nov 25) at 34.05p, having been 31.85p yesterday.
The consortium said it recognised that the AA’s core strengths lay ‘in its iconic brand, market-leading positions, and skilled and committed workforce’.
But it added: ‘The consortium believes that the AA has been held back as a result of underinvestment and high levels of debt.
‘The consortium intends to inject additional funds into the AA to de-leverage the business and provide it with the operational freedom to drive the business forward, to better serve its customers and capitalise on its considerable strengths.’
It added that ageing IT infrastructure would be upgraded, and new products and services offered via its breakdown insurance division.
The AA’s driving schools and financial services also had ‘opportunities to better serve the membership with new products and services from a brand that is held in very high regard and trust by consumers’.
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