AA Ireland’s 2020 takeover price revealed to be €256.6m

AA Ireland's takeover in late 2020 by a US private equity fund led by former French president Nicolas Sarkozy's half-brother was valued at €256.6 million, according to the company used to complete the deal.

The deal, carried out at the level of a holding company above AA Ireland, called Erbium, included €136.1 million of goodwill, equating to a 112 per cent premium over its net identifiable assets, reflecting the expected profitability of the roadside assistance and insurance intermediary group.

That is according to a Companies Registration Office filing made late last year by the special purpose vehicle, Grafton Street Boulevard, that was used by financier Oliver Sarkozy's New York-based Further Global Capital Management to complete the purchase.

At the time the deal was announced in October 2020, it was estimated that the consideration was about €240 million. The sellers were Carlyle Cardinal Ireland Fund and Carlyle Global Financial Services Partners, who had acquired the business for €156.6 million as it was spun off by UK-based AA plc in 2016.

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Financed

“Management is happy with the progress made since the transaction and is working through the next stage of the company’s development to position AA for further growth in the Irish market,” a spokesman for AA Ireland said.

Further Global Capital Management financed the transaction mainly with €151.4 million of shareholder loans and the injection of of €8.53 million of equity to the takeover vehicle. Erbium has also been left holding almost €99 million of bank debt.

Erbium reported a €2 million fall in annual revenues to €62.4 million in the year through January 2021, as lockdowns and travel restrictions hit its operations, according to that company’s latest accounts, previously reported on by The Irish Times.

The holding company, into which AA’s insurance revenues, roadside breakdown operations and other services are consolidated, reported a loss of €4.9 million in for the period.

Further Global also pumped €40 million into Erbium in fresh equity during the year, with the investment used to help pay off loans to the previous owners of €53.5 million.

In a note attached to the accounts, Erbium’s directors say early pandemic lockdowns drove down revenues by shutting AA Ireland’s roadworthiness testing centres.

It also drove down demand for travel insurance products sold by the group, while its breakdown service was used less frequently because there were fewer cars on the road.

Executives

The group, which employs about 500 staff, has accumulated losses of some €26.8 million on Erbium’s balance sheet.

AA Ireland has seen a number of senior executive changes since its takeover by Further Global, including the departure early last year of chief executive of a decade, Brendan Nevin. He was succeeded by former senior Liberty Mutual executive Tom McIlduff.

Other changes under Further Global include the shutting down last year of the AA Roadwatch service which provided traffic reports and bulletins to Irish radio broadcasters.

Prior to the AA deal, Mr Sarkozy was already prominent in Dublin's business community for being part of the Mallabraca group of private equity investors that examined taking a stake in Bank of Ireland at the outset of the 2008 financial crisis.