Private equity-backed Acromas seeks outside investor to cut debt


aa_sqThe private equity-backed owner of breakdown recovery service AA and over-fifties group Saga is reportedly seeking a cash injection ahead of a potential break-up.

Asian and Middle Eastern sovereign wealth funds could possibly buy a minority stake in Acromas, which is owned by buyout houses Charterhouse, CVC and Permira.

The Sunday Times reported the news, without saying where it got the information.

Acromas was formed in 2007 though the £6.15bn merger of the AA and Saga and was one of the largest private equity-backed deals ever seen in the UK, valuing the companies at £3.35bn and Saga at £2.8bn respectively.

The deal was financed with close to £5bn of bank debt. The company’s borrowings have since fallen to £4bn, although a large proportion of the loans are due for repayment in 2015, the report said.

Selling an interest to an outside investor would allow some of the debt to be repaid early, paving the way for a sale of the company, the report added.

Acromas has performed well since the merger in 2007 – sales rose 15 per cent last year to £2.1bn while earnings rose to £519m – although the size of its debts has limited the exit options for its private equity owners.

The buyout firms could float the business for as much as £9bn, but some investors may baulk at buying shares in a business that is saddled with so much debt, the report said.

Acromas could be split back into two separate businesses again to enable Charterhouse, CVC and Permira to exit their respective investments, the report added.

Bankers told the Sunday Times that the AA would probably be sold to another private equity buyer for as much as £5bn, while Saga would probably be floated on the public market.

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