Aviva plc (“Aviva”) announces that it has agreed to sell RAC Limited (“RAC”), the second largest UK roadside assistance provider, to The Carlyle Group (“Carlyle”) for £1.0 billion*. The transaction values RAC at 17 times 2010 net earnings**. Completion, which is subject to regulatory and competition approvals, is expected at the end of the third quarter of 2011.
Carlyle, a global alternative asset manager, with significant experience of investing in UK companies, is fully supportive of the RAC management team, led by RAC’s Managing Director Angela Seymour-Jackson, and its strategy to profitably grow the business.
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.”
Strategic rationale for the sale
The sale supports Aviva’s strategy to focus on insurance and savings businesses in its priority markets and represents further significant progress in the transformation of Aviva’s portfolio. The proceeds, which will be held as cash on the balance sheet, will enhance liquidity and further strengthen Aviva’s balance sheet, enabling Aviva to continue to invest in its priority markets. In addition to the strategic benefits, Aviva remains confident in meeting the group’s near-term financial targets.
Financial impact of the sale on Aviva
Based on 31 December 2010 results, this transaction will increase net assets by £0.6 billion and tangible net assets by £1.0 billion, or approximately 37p per share. Aviva’s IGD surplus will improve by £0.2 billion. The accounting profit on disposal is expected to be £0.6 billion.
Aviva will retain the RAC (2003) pension scheme which at 31 December 2010 had an IAS19 deficit of approximately £160 million. On completion Aviva will make a one off contribution of £67 million into the scheme.