Addison Lee scrambles to find a buyer as competition from Uber pushes it off coursehttps://www.telegraph.co.uk/business/20 ... es-course/In late 1976, the Sex Pistols were taking Britain by storm. Anarchy in the UK was blasting out of radios as punk rock swept across the nation.
John Griffin was interested in radios of a different sort, however. His father’s road building business had run into difficulties and the 22-year-old was told he needed to start paying his way. Ditching his accountancy studies, Griffin bought a car and some second-hand radio equipment and set himself up as a minicab driver.
Before long he was making a tidy profit. Addison-Lee Car Service made £2,116 during the 21 months to Dec 12, 1976, according to the company’s first set of accounts.
In four decades that followed, Griffin built Europe’s biggest minicab empire. Addison Lee secured a raft of lucrative business accounts – these days it counts 80pc of the FTSE 100 as clients – and pioneered technology that bypassed the standard call for a taxi. Like so many cabbies, the businessman quickly established a reputation for not mincing his words.
Big companies like Disney or ITN received short shrift from Griffin when making special demands. “I’ve given it to them, exactly these words: stick it up your a---. I’m that bloke,” he said in 2010.
Griffin cashed out in April 2013, handing over the keys to US private equity firm Carlyle in a deal worth £300m. But almost seven years later and Carlyle is in danger of being left at the rank. Addison Lee is up for sale but the auction is floundering and it is swamped with £250m of loans.
“You’d have kind of thought that would have been a good investment,” says one deal insider. “But my impression was that the earnings hadn’t gone as planned; that the business plan was significantly underachieved.”
In 2014 the company made £30m of operating profit on £235m of revenue. By 2018, the latest filed accounts, sales had swelled to £390m but the business had plunged into the red with operating losses of £5m. The filings reveal that while the company’s top line continued to rise, costs and business writedowns have steepled.
Figuring out precisely what has gone wrong is a bit of a head scratcher, so say those that have seen more up to date and detailed confidential management figures. The threat from Uber – in London in particular – is obvious, but suitors have struggled to get the bottom of why Addison Lee has veered off course.
Matters are further complicated by Addison Lee’s diverse group of lenders. UK banks such as Barclays, HSBC and RBS are joined by Continental heavyweights such as BNP Paribas, ING and CIC. All have different motivations; all have their own internal sign-off requirements.
One person says: “It’s a little bit hard to work out where we’ll end up because there are multiple stakeholders in this process.”
With Addison Lee’s loans due to be repaid in April, a backup plan has been hatched with the help of restructuring specialists from Alvarez & Marsal. The option would put lenders in control of the business. In return they would refinance around £170m of debts, giving the business breathing space for up to six years.
Nevertheless, those close to the process say that Carlyle has not given up on finding a buyer for Addison Lee.
But it is an increasingly uphill journey. The early interest that followed the appointment of Rothschild and Bank of America Merrill Lynch 12 months ago has largely evaporated. Uber and Indian ride-hailing app Ola were linked with making a bid as the auction started. Carmaker JLR took a look despite racking up big losses. Others interested parties included US fund Cerberus and Liam Griffin, the former chief executive and son of John.
Any interest has failed to meet Carlyle’s lofty expectations on value.
In early 2019, a price tag of between £300m and £500m had been slapped on the business. Bids have been as low as £40m and as high as £130m, sources say.
All of these approaches are a far cry from what was offered by transport company SMRT in October 2014. Less than a year after getting behind the wheel, the Singapore giant made an £800m swoop for the business. Carlyle rejected the approach – one that would have more than doubled their money in short order – preferring an expansion across the Atlantic; one that has proved much tougher than first thought.
Boss Andy Boland, once the finance director of car breakdown firm the AA, was last week hoping to restart Addison Lee’s sales process by courting potential investors in the US.
Those close to Carlyle say no one could have foreseen the “unprecedented disruption” by the likes of Uber, which is prepared to shoulder big losses. But having spent £300m on a minicab firm, pumped £120m into the business and never taken a dividend, the US private equity fund needs a lift.
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