GMB RESPONSE TO REPORTS THAT MERGE OF AA AND SAGA COULD BE PUT ON HOLD

GMB says private equity valuations of the AA and SAGA are far too high

Paul Maloney, GMB National Secretary for GMB members working for the AA said, “Today’s report that the AA/SAGA merger is under threat, as the banks fail to find additional underwriters for the £4.8 billion debt, will come as no surprise to GMB members. GMB has been pointing out that each of the 11,000 members of staff would have to carry borrowing of almost £400,000 per person and that the interest payments per annum per employee would be almost £30,000. This interest payment is more than double the annual wages of the call centre staff.

The Alice in Wonderland world where the multi-millionaire elite who run the private equity industry are able to take billions out of enterprises like the AA and SAGA is crashing into reality

The AA was a very profitable business when it was run by Centrica. It made almost a £100 million profit per annum. The private equity owners took it over and they saddled it with £1.8 billion of debt and they cut 3,400 or the 10,000 jobs thereby saving £70 million in operating costs. The result was that the AA fell from first to third in the WHICH rankings for waiting times and prices for customers not paying by direct debt went up by 30%.

The AA now claims to make £200 million plus profit per annum and on the back of these figures say that the AA is worth in excess of £3.4 billion.

Those lending money to the AA/SAGA merger need to be cautious on two counts. Firstly, the private equity owners seem to be suggesting that a price earnings ratio of 15 plus is realistic. That assumption need to be questioned. Secondly, GMB has been saying that the £200 million of profit is not sustainable. The patrol staff are working almost 12 hours a day and they will not carry on doing this indefinitely so money will have to be put back into improving operating arrangements that are more sustainable.