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Flotation plan for the AA as Acromas sells

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A deal has been struck to sell the AA for more than £930 million with its new owners announcing plans to float the company on the London Stock Exchange.

The new owners are a management buy-in team led by Bob Mackenzie working alongside the existing AA management team, with backing from group of investors known as the Cornerstone Investors, which includes Aviva, Blackrock, CRMC, GLG Partners, Henderson Global, Henderson Volantis, Invesco, L&G and Lansdowne Partners.

Acromas, which currently owns 100% of the issued share capital of the AA, have received binding commitments of more than £930 million from the Cornerstone Investors to acquire shares.

As part of the offer, the company is expected to issue approximately £210 million of new shares, with the remainder of the offer comprising the sale of existing shares.

Following the Cornerstone Investors' commitments, Acromas would retain an approximate 31% shareholding in the AA. However, given the interest shown to date, Acromas has agreed to make its remaining stake available to new investors at the same valuation.

The offer, which will commence shortly, will only be made outside of the United States to certain institutional and professional investors.

Admission is expected to take place in the second half of June 2014 and the total expected market capitalisation of the company at admission will be approximately £1.385 billion.

The sale follows an approach made by a management buy-in team led by Mackenzie, chairman of Northgate. He has held former roles as chairman and CEO of National Car Parks and its subsidiary Green Flag.

It is proposed that Mackenzie will be executive chairman, working alongside the existing AA CEO Chris Jansen and existing CFO Andy Boland.

The buy-in team of Mackenzie, Dr Martin Clarke and Nick Hewitt first identified the AA as a potential investment proposition over two years ago.

In the intervening period significant work has gone into formulating a strategy for the company which the team believe has potential to deliver an improved customer proposition and significant shareholder value.

Mackenzie said: “The AA is a very successful organisation with a strong record of serving its members and the needs of the UK motorist.

“We believe there are significant opportunities to grow the business, a sentiment shared by the high quality leading cornerstone investing institutions who have already committed over £930 million to the transaction.

“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. 

“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.

“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."

Jansen added: “This is a very exciting and timely development for the AA and marks the start of a new chapter for the Company.

“The AA is an iconic organisation and has at its heart a very skilled and loyal team of over 8,000 employees, dedicated to serving our members. 

“We have earned their trust over many decades and with it the opportunity to offer new products and services of the highest quality.

“Under its ownership, Acromas has continued to invest in the AA to ensure that we have maintained and extended our lead in service levels and organisational scope.

“On almost every metric, the service we deliver to our members is well ahead of that of our competition, and we will strive to maintain that position.

“I am pleased that all of the qualities, strengths and opportunities that I saw in the AA when I joined have been recognised by Bob, his colleagues and the Cornerstone Investors.

“I, alongside all of my colleagues in the AA, are looking forward to working together with Bob Mackenzie and the new team to grow the AA for the benefit of our members and shareholders.”

Andrew Goodsell, chairman of Acromas, said: “During the economic downturn we have steadily developed the business, both organically - launching the new Home Services business - as well as through the successful acquisitions of DriveTech and BSM.

“Our continued focus on people, technology and fleet has delivered industry-leading performance and customer satisfaction measures.

“The business is poised for great things as an independent public company. We wish the AA’s management team, employees, members and new shareholders all the best on this next phase of the journey.”

The AA was founded in 1905 and represents more than 40% of the roadside assistance market, responding to an average of 10,000 breakdowns every day.

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