AA..L Share News (AA.)

(Sharecast News) - AA said it was close to recommending a proposed cash offer of 35p a share from private equity groups TowerBrook Capital and Warburg Pincus working together.
The potential offer would value the vehicle breakdown service at about £218m. AA said the proposed price was 40% higher than its closing share price on 3 August, the day before the offer period started, and 50% more than its average share price over the month before that date.

TowerBrook and Warburg Pincus would inject about £380m into the company to reduce debt and specifically support the refinancing of £913m of bonds due for repayment in 2022, AA said.

AA shares fell 2.7% to 32.65p at 09:17 GMT.

The company said on 4 August it had received several approaches from potential private equity bidders. The debt-laden company had been considering options to strengthen its finances since May.

AA has about £2.7bn of net debt. It has said this amount of borrowing was a constraint on its long-term business prospects and that it needs large amounts of new capital.

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."

If agreed, the retreat to private ownership would be an ignominious end to the company's period as a public company. The company, founded as the Automobile Association in 1905, floated with a value of £1.4bn in 2014 when its former private equity owners cashed in their investment.

The company has been beset by governance problems and burdensome debt. It dropped out of the FTSE 250 in 2018 and scrapped its dividend as the Covid-19 crisis mounted in March.

TowerBrook was originally working with Centerbridge Partners on a joint bid and Warburg was operating on its own. Centerbridge and Platinum Equity, a sole potential bidder, pulled out of talks in September prompting TowerBrook and Warburg to join forces.

The two buyout groups have until 24 November to make a firm offer for AA or walk away unless an extension is granted by the Takeover Panel.