News Column

AA's debut on market is gloomy as share price slips

June 24, 2014

ellen thomas; ellen thomas

SHARES in AA Group have fallen after the UK motoring organisation joined the London stock market, just a month after its sister company Saga failed to impress investors in its own debut.

The AA, best known for its roadside recovery services, priced its initial public offering (IPO) at 250 pence a share to raise gross proceeds of pound(s)1.4 billion, with most of the money going to its private equity owners Permira, Charterhouse and CVC.

Shares opened at 244 pence yesterday and ended the day down at 232p.

The private equity firms sold their stakes to a management buy- in team, led by Bob Mackenzie, a former boss of car insurer Green Flag, who is to become AA's executive chairman, backed by institutional investors.

Mr Mackenzie said: "London is still a fantastic place to raise money.

"We saw 10 cornerstone investors and then we felt we had enough to make a credible offer."

AA received commitments of more than pound(s)930 million from those investors, which include Aviva, BlackRock and Legal & General.

They will take on AA's roughly pound(s)3bn of debt.

AA executive director Martin Clarke said: "The focus is on de- leveraging the business.

"The business is highly cash-generative and so will naturally de- lever over time."

The company will use pound(s)185m of the IPO proceeds, raised by the sale of new shares, to help pay down debt.

The AA is the UK's biggest motoring organisation and roadside recovery service, with around 16 million customers.

It also offers motor and home insurance and a driving school.

The firm had earnings before interest, tax, depreciation and amortisation (EBITDA) of pound(s)422.8m in the year to January 30.

Pretax profit was pound(s)214.6m, which was down from pound(s)312.7m a year earlier because of an increase in financing costs.

Saga shares are trading at 169.5p, below the 185p they were sold at in the IPO.


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Source: Herald, The (Scotland)


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