AA shares rise af­ter talks with in­surer Hast­ings are re­vealed

The Daily Telegraph - Business - - Business - By Lucy Bur­ton

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.

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