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AA in need of pick-up after falling below flotation price

Published: 13:19 23 Jun 2014 BST

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Motorists service company the AA (LON:AA.) priced its initial public offering (IPO) at 250p, placing a valuation of £1.39bn on the company.

In total, 554mln shares were floated on the London stock exchange on Monday, with 85mln of those being newly issued shares, which means the company raised around £185mln in fresh capital.

The shares dipped to 239p in lunchtime trading.

The flotation follows hot on the heels of the IPO of Saga, the over-fifties services company that went public last month; both Saga and AA used to be part of Acromas, a company owned by private equity firms CVC Capital, Charterhouse Capital and Permira.

The private equity groups, which bought the AA from utility group Centrica for £1.75bn in 2004, sold their entire holdings in the AA.

The great and the good of the City participated in the share offering, with the cornerstone investors being Aviva, Blackrock, CRMC, GLG Partners, Henderson Global, Henderson Volantis, Invesco, L&G and Lansdowne Partners.

"We are delighted to have secured £1.4 billion to acquire the AA, with our financial backing coming from many leading UK institutions,” said executive chairman, Bob Mackenzie.

“I would like to thank my colleagues on the MBI [management buy-in] team, together with the AA's existing management, the vendors and all the advisors involved for their efforts in bringing the transaction to fruition,” he added.

“We will work with the existing management and the AA's loyal workforce to deliver an enhanced experience for all our members and customers, and to serve the broader needs of the UK motorist. Our offer will enable the AA to become an independent publicly-listed company and we look forward to creating substantial value for all our stakeholders."

The AA is a former mutual society, created in 1905 by motoring enthusiasts. It demutualised in 1999 and was snapped up by Centrica the same year for £1.1bn.

The flotation of the AA was done at the hurry-up, possibly to get to the market ahead of the RAC, another motoring organisation that is thought likely to come to the market this year; the RAC is owned by US private equity firm Carlyle.

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