The board of AA said it is willing to recommend the offer from TowerBrook Capital Partners and Warburg Pincus International.
AA said the potential offer is at a 40% premium to the 25p price the day before the talks began, however the shares were 13% higher in August, were more than 70% higher in February and were 168% higher in March last year.
However, the company says that it has been mulling potential refinancing options, including the possibility of raising new equity.
In May’s final results it reported cash and cash equivalents of £159mln, a sizeable available working capital facility and plenty of headroom for its bank covenants and, while net debt was £2.6bn versus a market capitalisation of £0.3bn, it expressed confidence that its performance for the new financial year would be only slightly below the past year.
In September, Beverly Hills-based private equity firm Platinum walked away from talks, after an announcement from the AA in early August that it had been approached by several parties concerning an offer for the company and a potential refinancing deal.
The board now says it “believes that the company needs a more sustainable capital structure and requires a significant amount of additional new equity in order to reduce the group's indebtedness and to fund future growth”.
It added that the proposal from TowerBrook and Warburg Pincus includes an intention to also invest roughly £380mln into the company to help reduce debt support a refinancing of £913mln of bonds maturing in July 2022 and January 2022.
Under London’s ‘put up or shut up’ rules the pair have a deadline of 5pm London time on November 24 to make a firm offer.
TowerBrook maintains that it is 'co-headquartered' in New York and London, having been spun out of George Soros's private equity team in 2005.