AA owners line up banks to steer path towards £4.5bn exit

The owners of the AA, Britain's biggest breakdown recovery service, are lining up bankers to steer a path towards a sale or stock market listing next year which could value the company at well over £4bn.

Sky News has learnt that JP Morgan and Rothschild are in pole position to be appointed to conduct a review of the AA's strategic options following a recovery in its financial and operating performance. The AA, which has more than 16 million customers, including 3.3 million individual members, is jointly owned by three private equity firms: Towerbrook Capital Partners, Warburg Pincus and Stonepeak.

Insiders said this weekend that any form of corporate transaction involving the AA was not imminent or likely to take place for at least 12 months. They added that there was no fixed timetable and that a deal might not take place until after 2026.

Nevertheless, the impending appointment of advisers underlines the renewed confidence its shareholders now have in its prospects, with the business having recorded four consecutive years of customer, revenue and earnings growth. A strategic review of the AA's options is likely to encompass an outright sale, listing on the public markets or the disposal of a further minority stake.

Stonepeak invested £450m into the company in a combination of common and preferred equity, in a transaction which completed in July last year. That deal was undertaken at an enterprise valuation - comprising the AA's equity and debt - of approximately £4bn, the shareholders said at the time.

Given the company's growth and the valuation at which Stonepeak invested, any future transaction would be unlikely to take place with a price of less than £4.5bn, according to bankers. The AA, which has a large insurance division as well as its roadside recovery operations, remains weighed down by a substantial - albeit declining - debt burden.

Its most recent set of financial results disclosed that it had £1.9bn of net debt, which it is gradually paying down as profitability improves. AA owners over the years The company has been through a succession of owners during the last 25 years.

In 1999, it was bought by Centrica, the owner of British Gas, for £1.1bn. It was then sold five years later to CVC Capital Partners and Permira, two buyout firms, for £1.75bn, and sat under the corporate umbrella Acromas alongside Saga for a decade.

The AA listed on the London Stock Exchange in 2014, but its shares endured a miserable run, being taken private nearly seven years later at little more than 15% of its value on flotation. Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team in the form of chairman Rick Haythornthwaite - who also chairs NatWest Group - and chief executive Jakob Pfaudler.

For many years, the AA styled itself as "Britain's fourth emergency service.