Centrica has agreed to sell the AA for £1.75bn to a company formed by private equity firms CVC Capital Partners and Permira Advisers.
Net proceeds from the sale are estimated to be £120m and will be used to fund a proposed special dividend of £1bn as well as a planned rolling share repurchase programme of £500m. Centrica said this would be carried out over the next 12 months.
Centrica, which owns British Gas, paid £1.1bn for the AA in 1999. It said the decision to sell the AA was made in order to concentrate on its core utilities business.
Following the sale, Centrica said it would increase its planned investment in energy assets over the next five years.
Centrica said the decision to sell the AA recognised that “despite its strong growth in the UK under Centrica's ownership, the AA has limited opportunity for value-creating international expansion and would have continued to represent less than 10% of the group's earnings over the next five years”.
Under Centrica's ownership the AA's operating profit has grown from £6m to £93m in 2003, with customer numbers growing from 9.5 million to over 15 million.
In the year ended 31 December 2003, the AA recorded operating profits of £93m on a turnover of £797m. Net assets at 31 December 2003 were £645m.
CVC Capital Partners and Permira Advisers have confirmed that they intend to run the AA as an independent company. They said all existing AA employee pension rights will be fully safeguarded.
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