The private equity owners of the AA, Britain’s largest roadside recovery service, are eyeing a potential £5 billion sale or stock market flotation. This move comes as the competition heats up, with the RAC also targeting a London listing valued at a similar amount.
The AA, which offers roadside assistance, insurance, and driving lessons, is currently owned by a consortium including TowerBrook Capital Partners, Warburg Pincus, and Stonepeak. Initial discussions with prospective buyers have been reported by the Financial Times, indicating significant interest from both private equity firms and strategic investors. Additionally, the AA’s current owners are contemplating a return to the public market, nearly a decade after its last flotation under different private equity management.
The valuation of £5 billion places the AA at an advantageous point, particularly as its rivals are also exploring similar paths. The RAC, owned by CVC Capital Partners, GIC (Singapore’s investment fund), and Silver Lake Partners, is looking to go public, although a sale remains an option. However, insiders suggest that a stock market flotation is the more likely avenue for the RAC.
Founded in 1905, the AA was acquired in a £219 million takeover in 2020 after experiencing a challenging time on the stock market previously. During its last public stint, the business faced considerable turmoil, culminating in its shares plummeting to 15p in 2020 due to mounting debt concerns, totaling £2.6 billion at the time. However, following strategic restructuring, the AA asserts that its current debt stands at £1.9 billion, a significant reduction relative to its earnings.
The company’s recent performance has shown promising signs of recovery. With 17 million customers, it reported revenues of £623 million in the first half of the year, marking a 5% increase. Profits before tax surged by 54% to £50 million, largely due to lower finance costs. Underlying earnings also grew by 8% to £243 million.
In comparison, the RAC, with 15 million members — an increase from 14.1 million last year — reported revenues of £411 million, up 8% in the first half. Their underlying earnings experienced a 12% rise to £152 million, reflecting the business’s confidence in its future prospects.
As both companies warm up to the idea of public listings, the financial landscape for roadside assistance services appears set for further evolution. The AA, RAC, and their respective private equity owners have declined to comment on these developments, with other market participants approached for insights.
As the competitive landscape in roadside assistance continues to intensify, the valuations and strategic decisions taken by major players like the AA and the RAC will be closely monitored by industry stakeholders.
You can read more about this unfolding story on The Guardian.
