The company received a 35p per share offer for the whole company from TowerBrook Capital Partners (UK) and Warburg Pincus International
In the latest stock market news, shares in the AA slumped on Monday after the breakdown group confirmed it was close to accepting a takeover offer.
The company confirmed in a statement to investors that it had received a 35p per share offer for the whole company from TowerBrook Capital Partners (UK) and Warburg Pincus International.
It said its board “would be willing to recommend a cash offer” on the terms proposed, and that the company was in “advanced discussions” with the consortium.
The board believes that the company needs a more sustainable capital structure and requires a significant amount of additional new equity in order to reduce the group’s indebtedness and to fund future growth, it said.
The board has for some time been reviewing a range of potential refinancing options, including the possibility of raising new equity, it added.
The proposal would see the consortium invest around £380m in the company to help it reduce its debt and refinance £913m of notes.
The AA said the bidders had to confirm their firm intention either way by 5pm on Tuesday in line with takeover rules.
Shares in the AA dropped more than 8% as markets opened on the London Stock Exchange, but regained some initial losses and were around 3.6% lower in early trading.
The company had posted a 2.6% slide in revenue to £478m in its interim first-half results in September, and saw its pretax profits slide 38.1% to £26m.
Reduced workloads as the pandemic hit road travel saw the group cut costs, including scrapping pay rises, freezing hiring, use of the government furlough scheme and a 15% pay cut for its board.
The document also described debt reduction as the group’s “key priority.”
The group, founded as the Automobile Association in 1905, had 966,000 policies at the end of July.
