The AA’s biggest shareholder has heavily criticised its board for “jeopardising negotiating leverage” in their response to “very opportunistic” private equity takeover approaches.
The former FTSE 250 company, chaired by City veteran John Leach, confirmed last week that it had opened talks with Centerbridge Partners, TowerBrook Capital and duo Platinum and Warburg Pincus over a potential swoop.
Drew Dickson, of Albert Bridge Capital, which owns a 12pc stake in the AA, said he was “surprised” at the AA’s response to the approaches. He claimed the company “jeopardised negotiating leverage” by stressing its “dire circumstances”.
AA shares leapt more than 40pc over the course of last week to nearly 33p on hopes of a deal. A 40p per share offer has been speculated upon, but Mr Dickson labelled such a price “very opportunistic” and argued “the stock is worth much more than where it trades to today”.
He added: “The five-paragraph soliloquy about their purportedly dire circumstances risked jeopardising their negotiating leverage with potential buyers. I did wonder if it was intended to compel existing shareholders to acquiesce. But we believe the AA is under no duress, is cash flow positive, and is wholly capable of refinancing its debt right now.”
Mr Dickson’s remarks provide the clearest signal yet over fears about a Covid feeding frenzy by opportunistic bidders seeking to pick off companies weakened by the crisis. This weekend American investment firm Apollo became the latest suitor to join the bidding war for the AA, Sky News reported.
Anthony Forshaw, of boutique investment bank Houlihan Lokey, said: “Coronavirus and the associated sell-off of UK shares has presented a major opportunity for distressed investors to land a cut-price, take-private swoop – either through acquiring debt or making an offer for the shares.”
Richard Dunbar, of Aberdeen Standard Investors, said: “The stock market sell-off sparked by coronavirus provides investment opportunities for distressed-asset investors to take advantage of the crisis and the uncertainty that it has created to woo investors with lowball bids.
“Suitors would be wise to remember that shareholders in listed companies have already been rewarded for looking beyond the current crisis, and will seek value that reflects a world that will not always be as it is at the moment. The value attached to bids should reflect this.”
Graham Simpson, of Quest, which specialises in identifying buy-out opportunities of listed companies, said that house builders such as Redrow and Bellway were attractive targets. Dixons Carphone and Pets at Home, which have largely survived the onslaught from the likes of Amazon despite carnage on the high street, will also be popular, he added.
The approach for AA has also exposed friction between the board and its biggest investor over executive pay.
Mr Dickson said that historical share options pegged to much higher share prices “are no longer as relevant”.
The AA declined to comment.