The AA could be taken back into private equity ownership, as the debt-laden motoring group said it was willing to recommend a £218m takeover proposal from TowerBrook Capital Partners and Warburg Pincus.
The AA said the two private equity groups had proposed to pay 35p a share and would also invest £380m to help reduce its debt pile of £2.6bn. A firm offer must be made by 5pm on Tuesday under UK takeover rules.
The AA share price fell 3.7% to 32.3p on the news.
The firms are thought to have lined up Rick Haythornthwaite, a former chairman of British Gas owner Centrica, to chair the AA following the acquisition. He also chairs Mastercard and the Creative Industries Federation.
The AA said: “The board, having considered carefully the viability of a range of alternative potential debt and equity refinancing options together with its financial advisers, has indicated to the consortium that it would be willing to recommend a cash offer on the terms of the proposal. Accordingly, the company is engaged in advanced discussions with the consortium in relation to the possible offer.”
The firm, which was founded in 1905 as the Automobile Association, has 3,000 patrol vehicles and provides roadside assistance to 12 million members, including 3 million personal members. It also offers home and car insurance and driving lessons.
The £380m injection from TowerBrook and Warburg Pincus would be used to support the refinancing of £541m of loan notes maturing in July 2022 and £372m of notes maturing in January 2022.
The AA has been struggling under a heavy debt burden for years. It was owned by the private equity groups CVC and Permira until they floated it on the stock market in 2014 with debts of £3bn.
In August, the AA received three takeover approaches, from Centerbridge Partners and TowerBrook, and separate offers from the US buyout firms Platinum Equity and Warburg Pincus. When Centerbridge dropped out, TowerBrook teamed up with Warburg Pincus.
TowerBrook, headquartered in London, was spun out of Soros Fund Management, the alternative investments business of hedge fund manager George Soros, in 2005. In the summer, TowerBrook acquired the UK’s Azzurri Group, which owns the Zizzi and Ask Italian restaurant chains. It has also owned the luxury shoemaker Jimmy Choo in the past.
New York-based Warburg Pincus dates back to 1966 when EM Warburg, founded by Eric Warburg of the Warburg banking family, merged with Lionel I Pincus & Co.
