AA to split from Saga as huge pre-crash takeover unravels
The AA is to split from its silver-haired sister company Saga in a multibillion-pound deal that undoes one of the biggest corporate takeovers of the pre-crash credit boom.
The historic roadside assistance firm was bolted together with the pensioners' travel giant in a 2007 merger valuing the group at £6.2bn. That deal was funded by cheap credit and lumbered the company with debts of £4.1bn. Now a deal has been done that will refinance that debt on a longer-term, and cheaper, rate of interest.
Most of the refinancing will be through a secured bond issue that will free the private-equity backers of the business to split the two up again. It is expected that Saga will be floated on the stock market and the AA will be sold separately.
When that is eventually achieved, it will mark an exit from the businesses for the private-equity giants Charterhouse, CVC and Permira. At the time of the deal, the super-low interest rates available for buyout firms allowed them to cash in with a £2bn dividend. Ironically, the return of super-low interest rates on the bond markets means they have been able to pull off last night's refinancing. Thanks to the low central bank base rates, companies have been able to tempt investors to lend to them at extremely low rates of interest.
For critics of the culture of corporate takeovers that presided in the City, the AA's journey since the 1990s has been an inglorious one.
Its members eschewed nearly 100 years of mutual ownership in 1999 and sold the organisation. It was bought by Centrica for £1.1bn before being sold on in 2004 to the private-equity firms for £1.75bn.
Acromas, the name given to the merged Saga-AA business, is one of the biggest privately owned businesses in the country.
Similar giant loans from the pre-credit crisis days have also been refinanced of late, including the telecoms infrastructure group Arqiva and the shopping centres operator Intu.
However, there are growing concerns in the market that the new headiness of the bond markets could come juddering to an end.
Concerns that the US Federal Reserve will stop buying bonds under its QE programme led to a sharp increase in bond yields in recent weeks until the central bank let it be known last Thursday that any pullback from the asset-buying programme would be gradual.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...