British motoring organisation the AA is to be sold through an accelerated initial public offering (IPO), its private equity owners said on Friday, in a deal valuing the company at 1.39 billion pounds ($2.33 billion).
The flotation of the AA, only weeks after the listing of its sister company Saga (SAGAG.L) by private equity owners Permira[PERM.UL], Charterhouse [CHCAP.UL] and CVC [CVC.UL], is to be backed by a number of cornerstone investors.
The company best known for its roadside recovery services said it will would offer up to 554 million new and existing shares at 250 pence per share in the second half of June.
The accelerated public offering allows investors to bid for the entire offering and buy in at high speed, thereby avoiding a bookbuilding process.
Aviva Investors (AV.L), Blackrock (BLK.N), CRMC, GLG Partners, Henderson Global HGGH.L, Henderson Volantis, Invesco, Legal and General (LGEN.L) and Lansdowne Partners are among the deal's backers, with 930 million pounds in commitments led by Bob Mackenzie, a former boss of car insurer Green Flag, who will be executive chairman, the AA said.
"The AA is a fundamentally strong business and underpinning our approach is a clear strategy to invest in systems and new technologies to further enhance the service provided to our members and customers, to steadily reduce the AA's existing debt and to develop the growth opportunities that we have identified," Mackenzie said in a statement.
The listing is expected to give the AA an equity value of about 1.39 billion pounds, not including the company's hefty debt pile of around 3 billion pounds.
The private equity houses have owned the AA since 2007, when they merged the company with UK holidays-to-insurance business Saga into parent company Acromas in a 6.15 billion pound deal.
Saga was floated in May in a listing fraught with difficulties, including concerns about its classification as a specialist retailer rather than an insurer.
The stock priced at the bottom of its range and has since fallen significantly below its issue price of 185 pence a share, disappointing the thousands of Saga customers who bought into the listing.
The poor appetite also meant that Permira, Charterhouse and CVC decided not to sell any shares, leaving them struggling for an exit from an investment already seven years old. Private equity firms generally try to get out of their investments four to six years after buying in.
The AA is the UK's leading motoring organisation and roadside recovery service, with around 16 million members. It also offers motor and home insurance and a driving school.
The company, which says it rescues a broken-down vehicle every nine seconds, had core earnings (EBITDA) of 422.8 million pounds in the year to Jan. 30. Pre-tax profits were 214.6 million pounds, down from 312.7 million the previous year because of an increase in finance costs.
An enterprise value of 4 billion pounds would give the AA a multiple of almost 19 times pre-tax earnings.
Rival RAC, owned by U.S. private equity group Carlyle (CG.O), is also considering an IPO this year in a deal that media reports have said could value the company at 2 billion pounds. RAC had pre-tax earnings of 98 million pounds in 2011.
A previously hot market for IPOs has cooled somewhat in recent weeks, with fashion chain Fat Face pulling its listing the day before Saga's debut.
However the market still has some jumbo debuts in the pipeline, including that of ING's ING.AS insurance arm NN Group, expected to be one of the biggest European IPOs of the year.
(Reporting by Freya Berry in London, Esha Vaish and Tasim Zahid in Bangalore; Editing by David Goodman)