The AA (AA.L) is facing a potential court claim worth £44m ($60.2m) from the founders and backers behind Motoriety, an app that formerly linked motorists to repair garages, but has since folded.
Founders Lucy Burnford and Oliver Astley have accused the insurance stalwart of “fraudulent misrepresentation” during talks to buy a stake in the collapsed company, according to reports in The Sunday Times.
The report said AA had offered the company £400,000 and access to its millions of members in exchange for half of the company in 2015.
Allegations also include claims that AA delayed the launch of key Motoriety products until 2016. It also said it marketed the startup’s products to only a small group of AA customers.
Founders said that when the company struggled in 2017, AA had rejected proposals for investment that could have saved it and then bought it out entirely in a pre-pack process.
AA noted that the claims are “pie in the sky.” A spokesperson for the company said: “The AA entirely refutes Motoriety’s allegations. The AA sees no merit in them, and has not done so since it first raised allegations against The AA in December 2017, and is prepared to fully defend any claim it may choose to bring.”
AA recently confirmed in a statement to investors that it had received a 35p per share offer for the whole company from TowerBrook Capital Partners (UK) and Warburg Pincus International.
At the end of November it said its board “would be willing to recommend a cash offer” on the terms proposed, and that the company was in “advanced discussions” with the consortium.
The company had posted a 2.6% slide in revenue to £478m in its interim first-half results in September, and saw its pretax profits slide 38.1% to £26m.
Reduced workloads as the pandemic hit road travel saw the group cut costs, including scrapping pay rises, freezing hiring, use of the government furlough scheme and a 15% pay cut for its board.
The Sunday Times reported that a High Court writ is likely to be filed in the coming weeks, with the claimants advisers estimating that the case could be worth between £34.4m and £43.5m.
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