pounds 450m RAC takeover goes to MMC

THE pounds 450m takeover of the RAC roadside breakdown business by an American conglomerate was yesterday referred to the Monopolies and Mergers Commission (MMC).

The move is a blow to the 12,000 members of the elite Royal Automobile Club (RAC) who are hoping for a pounds 35,000 windfall from the deal. The referral means the payout will be delayed and may be blocked.

Kim Howells, the Competition Minister, said he had decided to refer the acquisition of RAC Motoring Services by Cendant Corporation on the advice of the John Bridgeman, the director-general of Fair Trading.

Mr Howells said the acquisition raised competition concerns in the breakdown insurance market.

Analysts had expected a referral as Cendant already owns the Green Flag roadside recovery business. The RAC deal would make it the second-largest rescue service in Britain, with about 8 million members. The AA, which said it was monitoring the position, has 9 million.

The RAC and Cendant said they regretted the referral but said they were still confident of receiving approval.

Neil Johnson, the RAC chief executive, said: "We firmly believe the sale will result in stronger competition and increased consumer benefits. We are confident that a full MMC investigation will confirm this."

Stephen Holmes, the Cendant vice-chairman, said: "While the referral will delay the completion of the transaction, we are confident that the proposed acquisition does not give rise to competitive concerns and will therefore be cleared by the MMC."

The MMC must report by 23 December, meaning that payouts to full members of the RAC Club in Pall Mall, London, will be delayed. The 5.8 million associate members, paying pounds 105 for rescue services, get nothing.