The AA has appointed advisers to explore a potential sale or stock market flotation, five years after the debt-laden roadside assistance group was taken private, as rival RAC also considers a return to public markets.
The AA, which is owned by private equity firms Warburg Pincus, TowerBrook Capital Partners and Stonepeak, has hired JP Morgan and Rothschild to review strategic options for the business, which is valued at around £5 billion. The process is understood to be at an early stage.
The move comes as the backers of the RAC are also assessing options, including a possible London listing as early as next year, in what could provide a rare boost to the UK’s subdued IPO market.
Warburg Pincus, TowerBrook, Stonepeak, the AA and JP Morgan declined to comment. Rothschild was approached for comment.
Founded in 1905 as the Automobile Association, the AA was owned by its members until it was demutualised in 1999. Its time as a listed company proved turbulent, largely due to heavy debts accumulated under previous private equity owners CVC and Permira, which acquired the business in 2004.
The AA floated in 2014 at 250p a share, with the price peaking at 416p the following year, before collapsing. In 2021 it was taken private by TowerBrook and Warburg Pincus at just 35p a share.
The group also endured management turmoil, most notably in 2017 when its executive chairman, Bob Mackenzie, was dismissed following a physical altercation with another director at a corporate awayday. Mackenzie later said the incident was driven by stress.
Today, the AA serves around 17 million customers. It reported revenues of £621 million for the six months to the end of July, up 6 per cent year on year, and pre-tax profits of £60 million, compared with £39 million a year earlier.
Crucially for potential investors, the company has reduced its leverage significantly. Net debt has fallen to 4.1 times earnings, down from 7.6 times just before it was taken private, putting it on track to reach a target of below four.
Jakob Pfaudler, the 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, the RAC, owned by CVC Capital Partners alongside Singapore’s GIC and Silver Lake Partners, is said to be studying a potential IPO, also targeting a valuation of about £5 billion. A sale to another buyer remains an alternative option.
An RAC flotation would be a welcome development for 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.
The RAC, founded in 1897 and one of the world’s oldest roadside assistance providers, has around 15 million customers. It reported revenues of £411 million in the first half of the year, an 8 per cent increase, and pre-tax profits of £62 million, up from £57 million a year earlier.
Its net debt stood at 4.6 times adjusted earnings at the end of June, down from 5.4 times a year earlier, reflecting a similar deleveraging trend to that seen at the AA.
The RAC was sold by Aviva in 2011 to buyout firm Carlyle for £1 billion, underlining how both of Britain’s best-known motoring organisations have repeatedly changed hands — and may now be poised for another shift in ownership.
Read more:
AA explores £5bn sale as RAC weighs London stock market listing
