The AA is eyeing a £5bn sale as the RAC weighs in on a London stock market listing
The AA has appointed advisers to explore a potential sale or stock market sale, five years after the debt-ridden roadside assistance group was taken private, as rival RAC also considers a return to the public markets.
AA, which is owned by private equity firms Warburg Pincus, TowerBrook Capital Partners and Stonepeak, has hired JP Morgan and Rothschild to review the strategic direction of the business, which is valued at around £5 billion. The process is understood to be in the early stages.
The move comes as RAC backers are exploring options, including a possible listing in London as early as next year, in what could provide an unusual boost to the UK’s subdued IPO market.
Warburg Pincus, TowerBrook, Stonepeak, AA and JP Morgan declined to comment. Rothschild has been contacted for comment.
Founded in 1905 as the Automobile Association, the AA was run by its members until it disbanded in 1999. Its time as a listed company has been tumultuous, mainly due to the large debts accumulated under former private shareholders CVC and Permira, which acquired the business in 2004.
AA floated in 2014 at 250p a share, and the price rose to 416p the following year, before collapsing. In 2021 it was taken private by TowerBrook and Warburg Pincus for just 35p a share.
The group has also endured management upheaval, most notably in 2017 when its executive chairman, Bob Mackenzie, was sacked following an altercation with another director on a business day. Mackenzie later said the incident was driven by stress.
Today, AA serves nearly 17 million customers. It reported revenue of £621 million in the six months to the end of July, up 6 per cent year-on-year, and a pre-tax profit of £60 million, compared with £39 million a year earlier.
Importantly for potential investors, the company has significantly reduced its leverage. Total debt has fallen to 4.1 times earnings, down from 7.6 times just before it was taken private, putting it at less than four times the target.
Jakob Pfaudler, AA’s chief executive, said earlier this year that the group was entering a new phase, shifting its focus “from transformation to acceleration”.
At the same time, RAC, which is owned by CVC Capital Partners alongside Singapore’s GIC and Silver Lake Partners, is said to be studying a possible IPO, and is targeting a valuation of around £5 billion. Selling to another buyer is always another option.
The RAC flotation would be a welcome development in the London market, which has struggled with a lack of new listings and a wave of takeovers in recent years. GIC and Silver Lake declined to comment, while CVC was approached for comment.
RAC, founded in 1897 and one of the world’s oldest service providers, has approximately 15 million customers. It reported revenue of £411 million in the first half of the year, an increase of 8 per cent, and a pre-tax profit of £62 million, up from £57 million last year.
Its total debt stood at 4.6 times adjusted cash at the end of June, down from 5.4 times a year earlier, reflecting the same deleveraging trend seen at AA.
RAC was sold by Aviva in 2011 to Carlyle for £1 billion, underscoring that both of Britain’s best-known car conglomerates have changed hands repeatedly – and could now be set for another change in ownership.
