AA shares struggle in first day’s trading

Another equity has been released from the Permira, Charterhouse & CVC stable, and like Saga before the shares are off to a soft start.

An AA service man inspecting a car
Source: Bloomberg

The AA is the UK’s largest automobile recovery service and has over 16 million members paying for its service. On top of roadside maintenance and recovery, the company also has arms which cover insurance and education.

AA shares were being offered at 250p and were oversubscribed ahead of today’s trading. Both institutions and retail clients have appeared equally interested in gaining a foothold in the company.

The main reason the consortium is selling out its position in the company is to take advantage of the buoyant IPO market that has recently been prevalent in the UK. The AA has debts of around £3 billion with profits of £214 million (2013), down from 2012 where it posted a pretax profit of £312 million.

Today’s float will have raised funds of roughly £1.4 billion, enabling the company to expand its current offerings while also writing down some of its debts.

Considering the placing was oversubscribed and companies such as Aviva, BlackRock and Legal & General were part of the institutional interest, it should be hoped that any initial weakness will be short-term.

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