GIC partners with Carlyle on RAC

Following completion of the deal, Carlyle and GIC will jointly hold a majority stake in the company, with RAC's management retaining the remaining shares.

RAC had been preparing an IPO following the £1.38bn flotation of its main competitor, Acromas-backed AA, in June. As a result of the deal with GIC, the company stated it would no longer be pursuing those plans "at this time".

Since acquiring RAC, Carlyle has invested more than £40m in the company. The capital has enabled RAC to invest in upgrading its IT systems and developing its sales and marketing database.

The GP's initial strategy was to place emphasis on ensuring customer satisfaction at both the consumer and corporate levels, while it also saw growth potential in new financial services offerings such as household insurance.

Less than two months after acquiring the company in 2011, reports emerged that Carlyle was looking to syndicate down equity in the company to other investors, with GIC believed to be a favourite. The development was because the large equity cushion of more than 50% was £520m, corresponding to nearly 10% of Carlyle's fund.

GIC stated it was attracted to RAC by the company's financial performance, quality of service and growth potential.

Previous funding
Carlyle acquired RAC from insurance company Aviva for £1bn in June 2011.

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.

RAC has around 8 million customers and net revenues of £485m. When Carlyle first acquired the company its net revenues were £433m.

People
Andrew Burgess is a partner at Carlyle. Henry Ormond is senior vice president at GIC Special Investments. Chris Woodhouse is CEO of RAC.

Advisers
Equity – Nomura (M&A); Freshfields (Legal).
Vendor – Lazard & Co (M&A); Barclays Bank (M&A); Goldman Sachs (M&A); Linklaters (Legal); JP Morgan Cazenove (M&A); Citigroup Global Markets (M&A); Bank of America Merrill Lynch (M&A); BNP Paribas (M&A); Latham & Watkins (Legal).

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