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The AA accepts takeover offer from US private equity pair

Published: 02:33 25 Nov 2020 EST

AA PLC -

AA PLC (LON:AA.) said its directors have recommended a 35p-per-share cash takeover by a pair of New York private equity firms.

As revealed earlier in the week, the takeover by TowerBrook Capital Partners and Warburg Pincus International values the roadside assistance and insurance group at £219mln.

While the offer is at a 40% premium to the 25p price the day before talks began between the parties, the shares were 13% higher in August, were more than 70% higher in February and were 168% higher in March last year.

However, the AA’s market valuation is dwarfed by debt that stood at £2.7bn at the end of July.

TowerBrook, which is ‘co-headquartered' in New York and London, and Warburg Pincus believe the AA has an “iconic brand” and leading positions in its markets but “has been held back as a result of underinvestment and high levels of debt”.

“The consortium believes that the AA needs committed, long-term owners to support the growth of the business and to invest in critical areas such as IT transformation which in turn, will generate new and better opportunities for customers,” it added in a statement.

The AA’s insurance, financial services and driving schools are seen as areas of potential growth by the private equity duo, which have promised to inject £380mln of new equity into the company to reduce debt.

The pair of suitors have received support from 15% of shareholders holding roughly 15.5% of the shares so far, including directors.

John Leach, chair of the AA, said: “Having carefully considered the range of options available to the AA including the terms of the proposed acquisition by the consortium, the AA Board has concluded that the acquisition, which offers certain cash value to the AA's shareholders as well as a significant equity injection to reduce indebtedness, is in the best interests of the AA, its shareholders and wider stakeholders, and as such is unanimously recommending the acquisition to shareholders.”

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