LONDON (Alliance News) - Roadside assistance and financial services company AA Ltd Friday said it plans to float on the London Stock Exchange's main market in an initial public offering valuing the business at GBP1.39 billion by market capitalisation.
The AA is being floated by a group of private equity investors, which also floated the over-50's insurance provider Saga PLC on May 23. Saga is now trading below its 185 pence IPO price at 177.63 pence, and several other recent listings have also dropped well below their IPO prices amid fears that valuations had gone too high earlier this year.
Owner Acromas is owned by private equity groups Charterhouse Capital Partners, CVC Capital Partners and Permira.
In a statement, the UK's largest roadside assistance provider by market share said it is offering up to 554 million new and existing shares, its entire share capital, at 250 pence each. It is expected to issue about GBP210.0 million of new shares under the offer. The shares are expected to begin trading in the second half of June, with a free float of at least 25%.
Acromas has received binding commitments from cornerstone institutional investors, including Aviva Investors, Blackrock Inc, some funds managed by Capital Research and Management Company, Man Group PLC's GLG Partners, Henderson Global Investors, Henderson Volantis Capital, Invesco Asset Management Ltd, Legal & General Investment Management, and Lansdowne Partners, for more than GBP930.0 million.
The AA said that it will use about GBP185 million of the expected net proceeds to reduce its leverage. It raised in excess of GBP3.0 billion of debt through the bank and capital markets in July 2013 via an investment grade secured corporate financing.
It also expects to use any surplus operational cash flow to reduce its leverage, meaning that it doesn't expect to pay any material cash dividends in the near future. However, the AA said it intends to adopt a progressive dividend policy in the medium term.
Acromas said that it has made its remaining 31% stake available to new investors at the same valuation due to the interest it has received so far.
Acromas is selling up after it was approached by a management buy-in team led by Bob Mackenzie, the former Chairman of fleet management business Northgate PLC, who has been put forward as the AA's Executive Chairman. He would work alongside existing Chief Executive Chris Jansen and current Chief Financial Officer Andy Boland.
In the year ended January 31, 2014, the AA generated GBP973.9 million in trading revenue, compared with GBP971.0 million a year earlier. Its roadside assistance division is the largest in the company, making up 72% of trading revenue in its most recent financial year.
Cenkos Securities PLC, which is the sole co-ordinator and bookrunner on the IPO, said that a successful flotation would have a "significant impact" on its current year revenues.
Cenkos shares were Friday quoted at 216.00 pence, up 19%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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