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Motor insurer AA plc announced that it is in discussion with multiple parties regarding possible cash offers for the entirety of its share capital. These discussions are a part of a wide range of options the company is considering as part of a potential refinancing of the group’s indebtedness.
The company has been approached by US firms Platinum Equity Advisors LLC and Warburg Pincus International LLC, alongside UK firms Centerbridge Partners Europe, LLP and TowerBrook Capital Partners (U.K.) LLP (acting jointly). The potential offerors have also indicated that any possible offer would involve a significant amount of new equity capital being injected into the group to help reduce the group’s indebtedness.
AA has approximately £2.65 billion of total net debt, of which £913 million is due for repayment within the next 2 years, and as such debt reduction is a key priority for the group. The company has stated:
‘The Board of AA believes that in order for the business to achieve its full potential it needs to have greater financial flexibility to make longer-term investment decisions that are in the best interests of the Group's shareholders and its wider stakeholders. To achieve this, the Group needs a more stable and sustainable capital structure, and this requires a significant amount of additional new capital in order to reduce the Group's indebtedness and to fund future growth. ‘
In H1 2020, Market Tracker reported 67% of all firm offers announced were P2P transactions (with 60% of all announcements being P2P transactions). This depicted a continued half-yearly increase with 39% and 58% of firm offers constituting P2P transactions in H1 2019 and H2 2019 respectively. With current market turbulence leading to lower valuations for companies, and a significant amount of dry powder available in the private equity community, expert commentators have expected this trend to continue through the remainder of 2020. AA attracting interest from multiple funds showcases these predictions, with 100% of all firm offers announced since H1 being P2P transactions (with 91.7% of all announcements made involving bids from private equity, family offices or individuals).
The possible offers also highlight the continued interest from overseas companies for UK quoted companies, particularly in the US.
For more expert commentary on trends in H1 2020 and beyond, alongside detailed statistical analysis see our H1 public M&A trend report. Market Tracker will continue to report on these trends as they develop.
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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