Investor Stonepeak Acquires £450 Million Stake from AA Backers in Significant Deal
After nearly three years since the AA’s delisting from the London Stock Exchange, the renowned breakdown recovery service is set to receive a substantial infusion of funds from a US-based investment firm.
As per reports from Sky News, Stonepeak, specializing in infrastructure investments, is on the verge of finalizing a significant injection of £450 million into the company. The AA, long recognized as ‘Britain’s fourth emergency service,’ appears poised to benefit from this impending deal.
City sources said this weekend that Stonepeak’s investment, which is expected to involve it taking a stake of about 15% in the AA, could be announced as soon as next week.
A statement is expected to be made to the Irish Stock Exchange, where the AA has publicly traded bonds, the sources said.
The deal, which will imply an enterprise value for the company of approximately £4bn, will underscore the turnaround in its fortunes under chief executive Jakob Pfaudler, who took the helm in 2021.
The AA has an experienced leadership team, including Rick Haythornthwaite, the chairman-designate of NatWest Group, as its chairman.
People close to the company say that under their stewardship, more than £1bn of value has been created, with the company now cash-generative and customer numbers once again growing.
The AA remains indebted, with net debt of £2.2bn at its last year-end.
Insiders said the new investment from Stonepeak would be used to strengthen the AA’s balance sheet by repaying some existing debt, as well as to invest in growth initiatives.
With 14m members, the AA and the RAC dominate Britain’s roadside recovery market.
Founded in 1905 by a quartet of driving enthusiasts, the AA has had a hectic recent corporate history.
It passed 100,000 members in 1934, before reaching the 1m mark in 1950.
Over the past two decades, the AA has seen diverse ownership, having been under Centrica’s umbrella, shared a parent company with Saga, and operated as a standalone listed entity in London. However, in 2021, it underwent another privatization phase following a bid from Towerbrook Capital Partners and Warburg Pincus, a move prompted by the persistent challenge of managing its substantial debt, resulting in an equity valuation of less than £250 million.
The AA, renowned for its fleet of 2,700 patrols attending to approximately 9,400 breakdowns daily, also boasts the UK’s largest driving school business operating under the AA and BSM brands. Aligning with a similar strategy seen in its closest UK rival, the RAC, which partnered with Silver Lake in 2021, the AA is introducing a third major shareholder, Stonepeak, reflecting the evolving landscape of the industry.
Although the company has explored options to sell its insurance arm, which serves millions of customers, it is currently not actively pursuing a sale. Goldman Sachs is advising the AA on Stonepeak’s investment, while a spokeswoman for the company declined to offer any comment on Saturday.
