Insurance Giant Aviva Sells RAC For £1bn

Insurance group Aviva has sold breakdown recovery firm RAC to private equity group Carlyle in a billion-pound deal, it has confirmed.

The RAC has a 30 pct share of the UK breakdown market

The deal, exclusively revealed by Sky City editor Mark Kleinman, follows a three-way fight to buy the company.

BC Partners and Clayton Dubilier & Rice are also understood to have bid for the firm.

The £1bn price tag represents 17 times RAC's net earnings for 2010.

Aviva bought the firm for £1.1bn in 2005.

Since then it has dismantled the business by selling subsidiaries such as the BSM, the motoring school, and Auto Windscreens.

Aviva said it will continue its commercial relationship with RAC as a key underwriter of motor insurance and as a partner, selling RAC breakdown cover to Aviva's customers.

The RAC has a 30% share of the breakdown market in the UK.

It has seven million customers, 2,000 patrols and attends 2.8m breakdowns a year. Its The breakdown phone lines get a call every seven seconds.

Andrew Moss, group chief executive of Aviva, said: "The sale of RAC is another important step for Aviva and realises significant value for our shareholders.

"Together with the recent partial disposal of Delta Lloyd, it demonstrates clear delivery of our strategy and provides the flexibility to deepen our presence in the priority markets where we have strength and scale."

The aim is to complete the deal by this autumn.