RAC sold for £1bn to Carlyle Group
23 June 2011
Author: Hugh Hunston
RAC is being sold by insurance group Aviva to the USA private equity firm Carlyle Group for £1 billion, three months after the roadside rescue and business car risk management operation was put up for sale.
Current RAC management, led by MD Angela Seymour-Jackson, will remain in place and the sale follows an intense bidding war for the organisation.
Commercial links will remain with RAC selling breakdown cover to Aviva customers, and Aviva serving as an underwriter on RAC's motor insurers' panel.
The deal, expected to make Aviva an accounting profit of £600 million, should be completed in the third quarter of this year. The outgoing owner plans to retain RAC's pension fund to which it will make a one-off contribution of £67m, to reduce a £160m deficit.
The sale comes six years after Aviva bought RAC for £1.1bn from Lex Group and had previously raised £500m through selling of various parts of the firm, including BSM.
Andrew Burgess, managing director of Carlyle Group, said his private equity group recognised the RAC as offering: "strong longer term potential to grow the business" by investing in financial services including vehicle insurance and "motor services."
This included: "looking forward to leveraging our industry network and deep-sector expertise." Carlyle's automotive sector involvement extends to owning Hertz Corporation, the leading global car rental firm, Applus, a leading vehicle testing company and Britax Childcare, producers of child car safety equipment
RAC is the UK's second largest car breakdown service with its headquarters in Birmingham. It employs 4000 staff and has more than 7m customers. Last year it made a pre-tax profit of £82m. Separating RAC from Aviva will cost £30m.
RAC Business Solutions won this year's BusinessCar risk management award through initiatives including driver compliance checks, that monitors business drivers' licences four-times a year with the DVLA.
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