Carlyle buys RAC for £1bn

The deal values the business at around 12x its 2010 EBITDA. Aviva stated that the headline £1bn price equates to an equity value of £985m, net of certain liabilities of £15m. This is before costs related to the separation of RAC and Aviva of £30m.

Carlyle invested through the €5.4bn CEP III vehicle. Completion, which is subject to regulatory and competition approvals, is expected at the end of the third quarter of 2011.

The JP Morgan Cazenove-run sale process saw rival firms Clayton Dubilier & Rice, BC Partners and Bain Capital bid for the asset.

RAC was acquired by Aviva for £1.1bn in 2005. The insurance company had since then been streamlining the business - notably by selling driving school BSM and windscreen repairer Auto Windscreens - raising around £500m in the process.

The divestment was motivated by Aviva's strategy to focus on insurance and savings businesses in its priority markets. Aviva will nevertheless retain RAC's pension fund - currently with a £160m deficit - and make a £67m one-off payment into the scheme.

Carlyle will now aim to enhance RAC's roadside business, with an emphasis on ensuring customer satisfaction at both the consumer and corporate levels. The buyout house also believes there is growth potential in new financial services offerings such as motor and household insurance.

Debt
Barclays declined to comment on the debt financing element of the transaction, but stated it was "conservative".

A consortium of banks comprising BNP Paribas, Crédit Suisse, JP Morgan, Morgan Stanley and UBS was however reported to be involved in the financing arrangement, which is also believed to be comprising a high-yield element.

Company
Founded in 1897, RAC provides motor-related services to both consumers and corporate clients. This includes vehicle and breakdown services as well as motor insurance broking and motoring-related legal services.

The Birmingham-headquartered group employs around 4,000 people and posted an €82m EBITDA for 2010.

People
Andrew Burgess led the deal for Carlyle. Angela Seymour-Jackson is CEO of RAC.

Advisers
Equity - Lazard (Corporate finance); Clifford Chance (Legal).
Vendor - JP Morgan Cazenove (Corporate finance); Slaughter & May (Legal).

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• Buyouts
• Carlyle Group
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