AA Declines in First Day of Trading After $2.4 Billion IPO

Jun 23, 2014 12:42 pm ET

(Updates shares from second paragraph.)

June 23 (Bloomberg) -- AA Plc, the U.K. roadside-assistance provider and auto insurer, fell on its first day of trading after a 1.4 billion-pound ($2.4 billion) initial public offering that resulted in the exit of its private-equity owners.

AA, which was owned by Charterhouse Capital Partners LLP, CVC Capital Partners Ltd. and Permira Advisers LLP, sold 554 million shares at 250 pence apiece, according to a statement today. The stock closed 7.2 percent lower at 232 pence in London.

Investors are becoming more selective as London has its busiest IPO year since 2007. Saga Plc, a provider of insurance and holidays to over-50s that had the same private-equity owners as AA, priced its May IPO at the bottom of a range and the shares are down 8 percent since. TSB Banking Group Plc was priced below its book value for its IPO last week.

AA’s IPO was announced after the Basingstoke, England-based company’s owners agreed to sell shares to a group that includes its managers and Bob Mackenzie, former chairman of National Car Parks. GLG Partners, Invesco Corp. and Henderson Group Plc were also part of the investor group. AA raised 185 million pounds from the sale of new shares in the IPO and will use the proceeds to reduce net debt.

AA had raised more than 3 billion pounds of debt in July. The insurer reported earnings before interest, taxes, depreciation and amortization of 426.9 million pounds for the 12 months to April 30, according to a June 6 statement. It will have a net debt to EBITDA ratio of 6.9 times after the IPO proceeds.

Other investors who bought shares include Aviva Plc, BlackRock Inc., CRMC, Lansdowne Partners LP and Legal & General Group Plc., according to the statement. Acromas Holdings Ltd., the buyout firms’ investment vehicle, received about 1.2 billion pounds in the IPO after selling all its shares.

Cenkos Securities Plc managed the transaction.