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The private equity takeover of the AA is approaching a roadblock, after its biggest shareholder said it will oppose the £219m deal.
Albert Bridge Capital criticised a 35p-a-share buy-out from Warburg Pincus and TowerBrook Capital Partners as “inadequate” and “derisory”.
Under the takeover mechanism used, the AA’s board needs 75pc shareholder approval, so the Chelsea-based fund’s 20pc stake is almost enough to block it.
The AA could be forced to reduce the threshold to a simple majority, risking a protracted battle. Albert Bridge’s opposition pits it against US hedge fund Davidson Kempner, a 16pc shareholder that has backed the deal.
The AA, chaired by City veteran John Leach, agreed terms with the private equity duo on Wednesday. But Drew Dickson, Albert Bridge’s chief investment officer, said the deal “fundamentally undervalues the equity”.
The share price had been “artificially and exaggeratedly depressed” by the pandemic, he said in a letter to shareholders.
“It is the private equity business model to try to pay as little as possible to secure control of these economics, and to use negotiating leverage to do so,” he said.
“Shareholders should be wary of any acquirer looking to buy at the bottom and keep all future upside to itself.” The board and other investors must “demand that the consortium make an offer that is more palatable”, he added.
The AA has struggled since floating in 2014. Investors, including former star stockpicker Neil Woodford, backed the stock market debut led by former car park executive Bob Mackenzie who was fired after a “sustained attack” on a colleague in 2017.
The AA’s shares have fallen as it struggled to repay debts. It owes more than £2.5bn to banks and bondholders. The prospective owners have pledged to inject £378m of equity to reduce the debt burden.
Mr Leach said last week that the deal was in the best interest of “shareholders and wider stakeholders”.
