Carlyle Group confirms it's buying RAC from Aviva for £1 billion
The Carlyle Group (an asset management firm) has confirmed that it has reached an agreement to acquire RAC Limited from Aviva plc for £1 billion. The deal is subject to regulatory approval, but is expected to complete by the end of the third quarter of 2011. Moving forward Carlyle’s strategic involvement appears to centre on the access to “additional capital for future investment” it can provide for expansion into other areas of motor service amongst other things. And the intention appears to be to expand “in the area of the motor services market.” Aviva bought RAC for £1.1 billion in 2005.
According to a statement confirming earlier reports that a sale was imminent which began circulating 22 June, the RAC management team has a clearly articulated strategy “to optimise the roadside recovery business, grow the insurance and financial services business, and diversify further into motor services and other personal finance-related products in the longer term.”
Commenting on the transaction, Angela Seymour-Jackson, CEO of RAC said: “We are very excited to be partnering with Carlyle, since their financial strength and experience in the motor services industry will be very valuable to us. This investment will enable us to enhance our current customer offering as well as diversify into new business areas. Carlyle has recognized that RAC is a high-quality business with significant growth potential. We have enjoyed an excellent partnership with Aviva, and are looking forward to our next phase of growth under new ownership.”
Andrew Burgess, managing director of The Carlyle Group, said: “We are delighted to be acquiring RAC, a renowned brand synonymous with trust and reliability. We see great opportunity to enhance the roadside business with an emphasis on ensuring customer satisfaction at both the consumer and corporate levels. There is also strong longer term potential to grow the business by investing in new and innovative financial services offerings such as motor and household insurance. We look forward to leveraging our industry network and deep sector expertise to enable RAC to reach its full potential.”
Equity for this transaction will come from Carlyle Europe Partners III (CEP III), a 5.4 billion euro buyout fund focused on investment opportunities in Europe. The fund has made seven investments in the past year. Carlyle’s experience in the automotive sector includes Hertz Corporation (the largest worldwide general use car rental brand), Applus (the leading global testing company for cars and the automotive industry) and Britax Childcare (leading manufacturer of premium branded children’s car safety seats). Carlyle’s investments in the insurance sector include China Pacific Insurance Group and Grupo Qualicorp. Carlyle’s recent investments in the UK include Talaris (cash management technology business), IDH (dental services provider) and The Mill (award winning visual effects company).
Carlyle was advised by Lazard and Clifford Chance. JP Morgan Cazenove acted as financial advisors and Slaughter & May acted as legal advisors to Aviva.
Founded in 1897, RAC is one of the oldest roadside assistance companies in the world and the second largest UK roadside assistance provider with over 7 million members. The company is headquartered in Birmingham, has approximately 4,000 employees, and provides motor-related services to both consumers and corporate clients. RAC’s vehicle and breakdown services are offered through a nationwide, branded patrol force, focusing primarily on vehicle repair and recovery. It also provides motor insurance broking services, legal and motor claims services.