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AA set for £4bn London float despite Saga flop It’s congestion ahead amid AA and Game flotations
(about 9 hours later)
The group of private-equity firms behind Saga’s flop flotation are set to take a second shot at the stock markets by listing the 109-year-old roadside assistance group AA. The AA is set to join the London Stock Exchange for the first time in its 109-year history later this month in a move that will value the roadside assistance group at £1.39bn.
Acromas Holdings, which is owned by Charterhouse, CVC Capital and Permira, hopes to value the AA at £4 billion despite growing flotation fatigue across the City, which culminated in Saga, its sister company, slipping below its 185p float price shortly after it went public. The trio of private-equity firms - Charterhouse, CVC Capital and Permira - that owned the business have sold it to ten of the City’s largest investors including Aviva Investors, Blackrock and hedge fund Lansdowne Partners.
The cruises and financial services firm has dropped 3.5% since last month’s listing, trading today at 178.5p. In an unusual “buy-in deal”, Bob Mackenzie, the former Green Flag chairman, will now take up the same role at the AA and lead a stock market flotation of the remaining 31 per cent of the group which the fund managers did not buy.
The AA was founded by a group of motoring enthusiasts in the West End in 1905 and styles itself as “the fourth emergency service”. The London listing will take place before the start of July and will come just weeks after the AA’s former sister company Saga went public. The cruises and financial services firm has dropped almost 6 per cent since last month’s listing, closing tonight at 174p.
The company has 15 million policyholders and will join the London Stock Exchange for the first time in a so-called accelerated initial public offering. Mr Mackenzie said: “We believe that as a public company, backed by investors of this quality, the AA will have a core set of long-term committed investors to support its continued growth and development. With such valuable support from our cornerstone investors, my colleagues and I are looking forward to continuing the AA’s growth as an independent public company.”
This means that 10 City institutions include Aviva Investors, Blackrock and Legal & General will act as cornerstone investors and agree to buy a specified number of shares. The AA was founded by a group of motoring enthusiasts in the West End in 1905 and styles itself as “the fourth emergency service”, claiming to deal with 10,000 breakdowns every day.
Rival RAC, which is owned by another private-equity backer, Carlyle, is also believed to be working on a stock market listing amid warnings that the market for IPOs is overheating. Unlike Saga, the AA will not target retail investors in its initial public offering because it does not plan to pay a dividend straight away and will use the cash raised from the flotation to pay down debt.
Game Digital shares today fell on their debut after the company listed at 200p, valuing it at £340 million, which was significantly below the £400 million valuation originally given to the retailer by City bankers. Alistair MacLean, national secretary of the IDU trade union, which represents AA workers, welcomed the deal.
Game, which plans to invest part of the £121 million it raised to boost its online business, joins Card Factory and Patisserie Valerie in debuting at the lower end of its anticipated range. “This is great news for the AA, which as one of Britain’s most trusted companies now has a stable and bright future.  We will need to see the detail but fully expect our members and AA staff to benefit in the future success of the AA.”
Retailer Fat Face pulled its planned float last month although the Georgian lender TBC Bank said today that it plans to raise $96 million (£57 million) by listing in London. Game’s flotation marks a rapid turnaround of the company which fell into administration two years ago. Rival RAC, which is owned by another private equity backer, Carlyle, is also believed to be working on a stock market listing amid warnings that the market for IPOs is overheating.
Chief executive Martyn Gibbs said last month the High Street chain had been “transformed”. The cyclical nature of the games market, which last year buoyed Game via the launch of the Microsoft’s Xbox One and Sony’s PlayStation 4, has also concerned some that its fate is not in its own hands. Game Digital shares fell to 195p on their debut today after the company listed at 200p, valuing it at £340m, which was significantly below the £400m valuation originally given to the retailer by City bankers. Game, which plans to invest part of the £121m it raised to boost its online business, joins Card Factory and Patisserie Valerie in debuting at the lower end of its anticipated range.
Gibbs said: “Game Digital is a profitable and cash-generative business with a great team, strong supplier partnerships and exciting digital growth opportunities.” Retailer Fat Face pulled its planned float last month although TBC Bank from the republic of Georgia said that it plans to raise $96m (£57m) by listing in London.
Kantar Worldpanel insight director Fiona Keenan backed Game to defy the market conditions. She said: “Game’s positioning as a retailer that plays in all fields — physical, pre-owned physical, and digital — is a smart move.” Game’s flotation marks a rapid turnaround of the  company which fell into administration two years ago. Chief executive Martyn Gibbs says that the high street chain has been “transformed” since it collapsed.