Singapore’s GIC buys stake in Britain’s RAC from Carlyle-Reuters

(Reuters) – Singaporean sovereign wealth fund GIC has bought a stake in RAC Ltd from U.S. private equity firm Carlyle Group, a deal that will halt plans to list Britain’s second largest roadside recovery group.

GIC did not specify the size or price of the stake it had bought, but said it and Carlyle would now jointly own a majority stake in RAC, with the company’s management holding the rest.

Carlyle Group bought RAC Ltd from Aviva in 2011 for 1 billion pounds ($1.63 billion). A person familiar with the GIC transaction said RAC now had an enterprise value, including debt, of around 2 billion pounds and that GIC and Carlyle would now have equal holdings in the majority stake.

The deal by GIC, which has assets estimated at more than $300 billion, derails plans for an RAC stock market debut which had been lined up for this year.

“It was very close. This was a very floatable business, and there was a lot of strong appetite,” Andrew Burgess, a partner at Carlyle, told Reuters in a telephone interview.
“While there’s been quite a strong appetite to test IPOs (initial public offerings) this year, what’s starting to happen is that investors are getting a little more choosy,” Burgess said.

Stock market listings have soared this year as a result of companies capitalizing on buoyant equity markets. Private equity funds have often been unable to match the steep valuations paid by yield-hungry public market investors.

But the balance has begun to shift away from stock market listings because of the poor performance of some IPOs and also because of increasing pressure on private equity firms to invest their cash. Companies with cash to spend are also becoming more active in the M&A arena.

Last week, Danish telecoms group TDC snapped up Norwegian cable operator Get AS for $2.2 billion, also averting a stock market listing.

RAC is the modern incarnation of the Royal Automobile Club, an association that was founded in 1897. It has about 8 million members, and responded to around 2.5 million breakdowns in 2013. The business had core earnings of 156 million pounds last year.

The company is Britain’s number two in the market to roadside recovery firm AA, which was listed by private equity backers Permira, Charterhouse and CVC earlier this year.
Carlyle and the RAC were advised by Lazard, Barclays and Goldman Sachs. Nomura advised GIC.