RAC elite to get pounds 34,000 from sell-off

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The Independent Online
THE RACING driver Damon Hill and 12,000 other people wealthy enough to afford membership of one of London's most exclusive clubs are looking forward to an average windfall of pounds 34,000 after Lex Service, the car-hire group, swooped on the RAC with a pounds 437m takeover offer.

The move, approved by the RAC board, will make little difference to the 5.7 million motorists who rely on the RAC's roadside recovery service - and for staff, it could mean the sack.

Lex's chief executive, Andy Harrison, said yesterday that windfalls for members of theclub, based in Pall Mall, would be on the same terms as those of a pounds 450m offer by the American corporation Cendant, which was blocked by the Monopolies and Mergers Commission in February. At the time, the RAC suggested that it might float on the Stock Exchange, offering all members the chance of getting shares.

Mr Harrison confirmed that ordinary roadside service members would receive no hand-out, but would benefit from a much wider range of motoring services including car purchase, insurance, repairs, roadside aid and vehicle hire. "The combination of the two companies will create a very powerful and comprehensive range of motoring services - almost a cradle-to-grave motoring services and mobility services capability," he said.

Lex, which operates a chain of 147 Autocentres and six Autosales outlets, said it believed it could achieve efficiency gains and synergy benefits - City code for job cuts - of at least pounds 30m a year by 2002 from the addition of RAC. It would not be drawn, though, on how many jobs might go. "It would be wrong to speculate. We have no specific plans at the moment," said Mr Harrison.

Lex is offering pounds 17,000 cash for each RAC share, plus a pounds 17m endowment to the organisation and pounds 4.6m for RAC staff bonuses. News of the deal sent Lex shares soaring by 18.5 per cent at one point.

The RAC's chairman, Sir Michael Angus, said the deal "represents a major step towards securing the board's primary objective of enabling shareholders to realise the value of motoring services.

"The offer follows a competitive and structured auction process run over the last three months involving many trade and financial buyers. The board's conclusion is that this offer represents the best outcome from this process in terms of value and certainty."

RAC, which has 28 per cent of the breakdown market behind the Automobile Association with 48 per cent, had turnover last year of pounds 294m and total costs of pounds 285m.

The market for roadside breakdown services has been growing by 5 per cent a year in the past decade. Mr Harrisonsaid: "We believe the demand for peace of mind will continue to grow, even though a lot of cars are becoming more reliable."