AA Races Towards 4bn Stock Market Listing

The AA, Britain’s biggest roadside recovery group, is poised to press ahead with a 4bn flotation despite a disappointing stock market debut from Saga, its sister company.

Sky News can reveal that Acromas Holdings, the AA’s parent, could announce plans for the listing through a process known as an accelerated initial public offering as soon as Friday.

The deal will involve approximately 10 City institutions acting as cornerstone investors, each of which will agree to acquire a substantial number of shares in the AA.

The fund managers expected to back the flotation, which will value the AA’s equity at roughly 1.3bn, include Aviva Investors, Blackrock, JP Morgan Asset Management, Lansdowne Partners and Legal & General Investment Management.

A source said on Thursday that details of the share sale were still being finalised and that there was a chance that the deal could still be aborted.

Bob MacKenzie, a former boss of Green Flag, the car insurance provider, has been lined up to act as the company’s new chairman, they added.

Deutsche Bank has been brought in to advise the company, while Cenkos Securities is acting as broker overseeing the recruitment of the major investors.

Acromas is a private equity-backed group which continues to own a majority stake in Saga, the financial services and travel specialist for the over 50s.

Shares in Saga closed up 1.6% on Thursday but have disappointed since listing last month.

Some institutions approached by Cenkos about participating in the AA deal were deterred by the motor insurer’s 3bn debt mountain, which they believed was inappropriately high for a public company.

The AA, which generates hundreds of millions of pounds of free cashflow every year, is expected to outline a plan for reducing its borrowings as part of of its listing prospectus.

If the listing goes ahead, the AA could make its own public debut by the end of June, completing a change of ownership for one of the UK’s biggest membership organisations.

Acromas has been expected to retain ownership of the AA for some time, given the scale of its borrowings relative to its earnings.

In the third quarter of last year, the AA reported sales of 244m, with earnings up 8.2% to 104m.

It has taken advantage of strong financing markets by launching a 350m bond, the proceeds of which are being used to repay a chunk of Acromas’s vast debt-pile.

The AA, which has styled itself as “the fourth emergency service”, has four million personal members and nine million business customers, giving it a 40% share of the roadside insurance market.

The accelerated IPO technique was first used in the City more than a decade ago by Collins Stewart, the investment bank which a group of Cenkos executives left to set up.

Like Saga, the AA has turned to new leadership, appointing Chris Jansen, a former British Gas executive, as its new boss.

Acromas is owned by Charterhouse, CVC Capital and Permira, three of the UK’s biggest private equity groups. They acquired the AA from Centrica, the owner of British Gas nearly a decade ago, before putting it under the same corporate ownership as Saga.

The AA’s principal rival, the RAC, is also racing towards the stock market, with Carlyle, its private equity owner, working on plans for a listing.

An Acromas spokesman declined to comment.

6 June 2014 | 7:19 am – Source: orange.co.uk

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