Aviva in the frame as suitor for RAC
Speculation centred on Aviva, Britain's largest insurer, as a potential bidder for RAC after the motoring services group revealed yesterday it had received a bid approach.
Speculation centred on Aviva, Britain's largest insurer, as a potential bidder for RAC after the motoring services group revealed yesterday it had received a bid approach.
Any bid is likely to value the 108-year-old company at about £1bn. RAC shares hit a record high yesterday, soaring 138.5p, or 19 per cent, to 880.5p. Private equity groups were also thought to be interested in acquiring the business. Other possible contenders include insurers such as Direct Line, owned by Royal Bank of Scotland, and Homeserve.
The approach comes six months after RAC's bigger rival, the Automobile Association, was bought by a private equity consortium. Insiders said the private equity firms Cinven and Kohlberg Kravis Roberts, which both lost out in the AA battle last July, may now have their eyes on RAC.
The AA was bought by CVC and Permira for £1.75bn from the utility firm Centrica.
While RAC is traditionally known for its roadside recovery service, it now has a broad portfolio of businesses, ranging from a driving school to car and home insurance and financial services. It also runs a vehicle-leasing business in a joint venture with HBOS.
RAC - which started life as the Royal Automobile Club - was a private members' club for nearly a century until it was taken over by the car hire company Lex for £437m in 1999. The deal resulted in £34,000 windfalls for each of its 12,000 full-time members.
Andy Harrison, the chief executive, hopes its recent decision to take control of the insurance joint venture it had with AXA will speed up its cross-selling opportunities. Just 2 per cent of RAC members buy their car insurance from the group. Membership numbers were flat last year at 2.2 million, while the renewal rate fell.
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