AA shares rise after talks with insurer Hastings are revealed
MERGER talks between the AA and insurance rival Hastings, which allegedly led to a bar-room brawl between the AA’s former chairman and its insurance head, are now over, Hastings said yesterday.
While the roadside recovery business yesterday confirmed it had spoken to Hastings earlier in the summer about a potential tie-up with its insurance arm, Hastings said in a separate statement that those talks were now off. Shares in AA nevertheless rose 3.4pc to 168.4p, while Hastings ended up 1pc at 311.7p. The AA said that it “regularly reviews all strategic options, including whether a spin-off of any of its business lines would unlock further value and be in its shareholders’ interests”.
Its latest set of accounts show that the group’s insurance business contributed £76m to its £403m revenue for the year to Jan 31, making it its second biggest revenue generator after roadside assistance.
Hastings meanwhile sought to downplay any suggestion that it was in talks with others, noting yesterday that while it “regularly reviews selective acquisition opportunities, its core strategy remains to deliver on its organic growth and its disclosed targets”.
The FTSE 250 insurer, which said its discussions with the AA “have ceased”, has had a strong start to the year with its profits rising 22pc for the first half after cashing in on the rising number of people shopping for a bargain on price comparison websites.
Spokesmen for both companies refused to comment further.
City analysts welcomed the news of the talks. Panmure Gordon’s Barrie Cornes added: “For the last few years UK motor insurers have been enjoying a moment in the sun and making underwriting profits which historically have proved extremely difficult to deliver. Whilst this is good news for shareholders we believe that there are potential clouds on the horizon such as automated cars, albeit the distant horizon. As such we think investors in companies such as the AA should welcome a potential exit route.”
Despite yesterday’s jump in the value, AA’s shares are still nearly a fifth lower than they were before the alleged bust-up between its former executive chairman Bob Mackenzie and insurance boss Michael Lloyd in a hotel bar at the end of July. Mr Mackenzie was then sacked for “gross misconduct” in a move that wiped £200m from the AA’s value in one day. However his son Peter has refuted the allegations, instead insisting his father resigned due to ill health.
Attention over the bust-up resurfaced this week after sources told the
Financial Times that it was over a potential spin-off of the AA’s insurance unit and a possible merger with Hastings.
Mr Mackenzie’s legal team are now fighting back on his dismissal, the paper said. Mr Mackenzie’s lawyer was unavailable for comment.