Business

Aviva to sell RAC for £1bn to private equity group

RAC rescue vehicle
Image caption Aviva bought the RAC in 2005 for £1.1bn

Insurance group Aviva has agreed to sell the RAC to US private equity firm Carlyle Group for £1bn.

The move is part of Aviva's drive to focus on its main insurance and savings operations.

Aviva said it expected to make an accounting profit of £600m from the sale and that it would use the proceeds to strengthen its balance sheet and invest in its priority markets.

The RAC is the UK's second-biggest car breakdown service.

Based in Birmingham, it employs 4,000 staff and has more than seven million customers.

It made a pre-tax profit of £82m in 2010.

Aviva shares were up 1.2% in morning trading.

The sale is expected to be completed by the end of the third quarter of 2011.

Under the terms of the deal, Aviva will make a one-off contribution of £67m into the RAC pension scheme, which had a deficit of about £160m at the end of 2010.

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