Stocks of Roadside Recovery company AA PLC (LON:AA) fell almost 5% on Monday evening and Monday evening as SkyNews reported it would recommend private equity takeover recommendations to cut its debt mountain of £2.6 billion.
Motor Group is reportedly considering a £218 million acquisition proposal from Towerbrook Capital Partners and Warburg Pincus, with the companies offering to pay 35 penns of shares and invest an additional £380 million to add to the repayment of AA’s outstanding debts.
To put that into context, when AA first floated the stock market in 2014, its shares were 250p, with its total stock price of around £1.4 billion.
The deal must be reached by 5pm on Tuesday, according to UK acquisition rules. It is understood that Rick Haythornthwaite, former chairman of UK gas owner Centrica, will chair AA after the acquisition. He currently chairs MasterCard and the Creative Industries Federation.
The AA said in a statement to the Guardian:
“The Board, along with its financial advisor, has carefully considered the feasibility of a range of various potential debt and stock refinancing options, and has shown to the consortium that it is willing to recommend cash offers on terms of the proposal. Therefore, the company is engaged in high-level discussions with the consortium in relation to possible offers.”
With nearly 3 million members, Basestoke-based AA was launched in 1905 as the Automobile Association and once styled it as the “fourth emergency service” in the UK. The company boasts 3,000 patrol vehicles, offering mainly on the street support, home and car insurance, and driving lessons.
AA shares were not impressed by the news on Monday. The market’s end fell 4.77% to 31.95p at 23/11/2020, but there was a significant improvement from the company’s annual NADIR of just 13.52p during February.
The stock has been hit by 28.46% throughout the year, but recent profits in the past month have once again increased by 31.83%. Its P/E ratio is 2.38, and its dividend gives a modest 1.88%.
