AA gears up for £1,39bn IPO

Permira, CVC and Charterhouse have agreed to sell £930m worth of shares and will issue further shares totalling £210m.

British motoring business the Automobile Association (AA), which is owned by Permira, CVC and Charterhouse, has announced its intention to list on the London Stock Exchange.

Acromas, the holding company under which the business was put by the private equity consortium, has already agreed to sell £930 million of shares prior to the listing to a group of institutional investors including Aviva, Blackrock, CRMC, GLG Partners, Henderson Global, Henderson Volantis, Invesco, L&G and Lansdowne Partners, according to a statement.

AA will use approximately £185 million of expected net proceeds to reduce the overall net leverage of the group. As part of the offer the consortium is expected to issue approximately £210 million of new shares.

Following the cornerstone Investors' commitments, Acromas would retain an approximate 31 percent shareholding in the AA. Given the interest, Acromas has agreed to make its remaining stake available to new investors at the same valuation.

The expected market-cap of AA will be approximately £1,39 billion. The listing is expected to take place in the second half of June.

In the year prior to 31 January 2014, the AA generated revenues of £973.9 million.

In July 2007, Permira and CVC combined the AA with Charterhouse-owned Saga, a UK-based travel and insurance group, in a deal that valued the combined group at £6.15 billion. The deal valued the AA at £3.35 billion and Saga at £2.8 billion.

It is understood Permira invested in AA using its Permira Fund III, a €4.95 billion 2003-vintage, while CVC invested in used its CVC European Equity Partners IV, a €6 billion vehicle raised in 2005.

The private equity consortium initially planned to sell the businesses as a whole, but decided to break them up last year as they felt it would be easier to sell them separately.

Last month, the groups listed Saga on the London Stock Exchange, which was valued at £2.1 billion. The company’s shares were priced at 185 pence. On Friday 4.20 BST Saga shares were trading at 174.50, giving the business a market-cap of £1,94 million.