AA owner gears up for mooted insurance sale

Michael Bow
Follow Michael
ACROMAS, the private equity backed owner of AA and Saga, has taken the first step in a possible break up of its portfolio after appointing Ernst & Young to value its business – opening the door for a sale of the firms.

The heavily indebted investment house has to liquidate or refinance its assets by September 2015 when its senior debt matures.

However, it is understood the firm has already set the wheels in motion by appointing E&Y to lay the groundwork for a sale or break up of the business.

Analysts have estimated AA could be worth about £5bn and Saga worth around £4bn if either were hived off and sold to the market today.

Last night a person familiar with the situations said E&Y was undertaking due diligence across all of Acromas’s businesses.

These include a number of other brands, including the British School of Motoring (BSM) and MetroMail.

They said the firm had not appointed advisers yet as the review was still at its preliminary stage.

Original proposals to float the firm back to market were shelved due to the poor investment markets over the past five years. Their persistence has stifled the board’s desire to float the firm more recently.

Acromas’s majority shareholder is private equity giant Charterhouse Capital Partners, holding 36 per cent. Fellow private equity firms Permira Advisers and CVC Capital Partners hold further stakes of around 20 per cent. Management also has a holding of 20 per cent.

Acromas, which employs 38,000 people and has 18m customers,, bought the two disparate insurance businesses in September 2007 in a highly leveraged merger of the firms for £6.3bn, using £4.8bn of bank debt to finance the deal.

It is understood options on the table include a float of AA or a sale of the business to another private equity firm or investor.

Acromas could also decide to raise money with a high yield corporate bond offering as an alternative to a sell off.

Ernst & Young declined to comment.

ACROMAS chief executive Andrew Goodsell is invariably referred to as the ‘poster boy’ for the private equity industry, on the back of his daring bid to squeeze together two of the biggest and most recognisable brands in the UK – AA and Saga.

Yet for all the praise, the deal was something of a departure for Goodsell, who had spent much of his career away from the world of private equity deal making in the traditional sphere of long-term business development.

The deal to form Acromas in 2007, with the help of private equity players CVC, Permira and Charterhouse, was underpinned by Goodsell’s deep-seated attachment to the Saga brand – a company he had worked for for more than a decade before the merger.

He originally joined the firm close to 20 years ago, growing it to become a major force in the financial services world.

Goodsell, 53, enjoyed a rapid rise at Saga, moving from a business development role to become chief executive in the space of a few years.

He joined the firm in 1992 as business development manager before quickly becoming head of business and product development one year later.

He swiftly established Saga as a frontline provider of financial products and a leader in investment offerings for its core market, the over-50s.

He was appointed director of business development for Saga Services and Saga Investment Direct in 1998 before being promoted to its managing director.

The move in 2007 to snap up AA and merge it with Saga was a daring one for Goodsell but underpinned by a belief the two businesses – each with their long, distinctive heritages – could work with one team.