AA reaches the end of the public road in private equity takeover

The AA says it is inclined to recommend a £218m takeover proposal from from a private equity firm.

The “debt-laden” AA is likely to be taken back into private-equity ownership, says Julia Kollewe in The Guardian . The motoring group has indicated that it is inclined to recommend a £218m takeover proposal from TowerBrook Capital Partners and Warburg Pincus. 

The deal would involve the two private-equity groups paying 35p a share while investing £380m to help reduce its huge debt pile of £2.6bn, £913m of which is due to mature in the next 18 months. 

The deal would also see Rick Haythornthwaite, a former chairman of British Gas owner Centrica, becoming AA’s chairman. The offer price of 35p, will “disappoint” shareholders given that it is pitched “only slightly above” the AA’s 33p-a-share price, says Kaye Wiggins and Daniel Thomas in the Financial Times. 

Still, it is a lot more than the 25p the shares were trading at in August before the AA announced that it was in talks with buyout groups. Shareholders who bought into AA when it was first floated in 2014 at 250p and held on may be angry that they stand to lose 85% of their investment, says Ben Marlow in The Daily Telegraph. 

However, “one wonders what they were doing”, buying shares when the company “careered” onto the stockmarket six years ago. After all, it arrived “with £3bn of borrowings”, the result of a pre-float refinancing that “handed its owners a £2.6bn dividend just as they were preparing to leap out of the driver’s seat”. This meant that the management was forced to focus on cost-cutting at a company “already starved of investment”.

Recommended

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Best regular savings accounts – January 2023
Savings

Best regular savings accounts – January 2023

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
27 Jan 2023
Equity release v downsizing – which is best?
Personal finance

Equity release v downsizing – which is best?

Equity release hit a record high in 2022. But is downsizing a better way to hold on to your money?
27 Jan 2023
Self-assessment tax returns: what you need to know about getting your tax bill right
Income tax

Self-assessment tax returns: what you need to know about getting your tax bill right

Understanding how self assessment works can help you ensure you pay the right amount of tax, as well as avoid penalties for missing the deadline.
27 Jan 2023

Most Popular

Council tax increases 2023 – how much more will you pay?
Tax

Council tax increases 2023 – how much more will you pay?

Your council tax bill will go up in April - we reveal the councils that have confirmed what this year’s increase will be.
23 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023