The owners of Britain's two motoring giants, the AA and the RAC, are steering towards major financial exits, with both companies potentially seeking valuations of around £5 billion through sales or stock market listings in London.
Private Equity Owners Chart Exit Routes
The AA, the UK's biggest roadside recovery provider, is owned by a consortium of private equity firms including TowerBrook Capital Partners, Warburg Pincus, and Stonepeak. According to initial reports by the Financial Times, this group has begun sounding out potential buyers for a sale that could be worth £5 billion. Simultaneously, they are considering a return to the London Stock Exchange, a decade after the company's previous flotation.
The rival RAC is on a parallel path. Its owners—Jersey-based CVC Capital Partners, Singapore's sovereign wealth fund GIC, and the US investment company Silver Lake Partners—are also working on plans that could value the business at £5 billion. While a sale remains an option, sources suggest a stock market flotation is the more likely outcome for the 128-year-old firm.
Transformation Stories After Turbulent Pasts
Both organisations have undergone significant transformations under private equity ownership. The AA, founded in 1905 as the Automobile Association, endured a difficult six-year stint on the public markets before being taken private by TowerBrook and Warburg Pincus in a £219 million deal in 2020.
Its previous private equity owners had floated the company in 2014 at 250p per share, valuing it at £1.4 billion. However, its shares plummeted to a low of 15p by 2020 amid serious concerns over its £2.6 billion debt pile. The current owners state the business is now on a firmer footing, with reduced debts of £1.9 billion, equivalent to 4.1 times earnings, a marked improvement from 6.7 times during its public era.
The company, which also offers insurance and driving lessons, now serves 17 million customers. It reported revenues of £623 million for the first half of the year, a 5% increase, with pre-tax profit surging 54% to £50 million, aided by lower finance costs. Underlying earnings rose 8% to £243 million.
Strong Financial Performance Fuels Confidence
The RAC is also posting robust figures, providing a solid foundation for its potential listing. Its membership has grown to 15 million, up from 14.1 million the previous year. In the first half of the year, revenues increased by 8% to £411 million, while underlying earnings climbed 12% to £152 million. The group expressed confidence in its outlook for the remainder of the year and beyond in an August update.
Analysts suggest the strong operational performance of both firms, coupled with their vast, loyal customer bases, is what makes the £5 billion valuations plausible to potential investors and buyers. The plans for both the AA and RAC are understood to be in early stages, with no final decisions yet made. The AA and CVC declined to comment on the reports.
