RAC steps on the gas after bid approach

SHARES in motoring organisation RAC hit top gear today after the company revealed it had received a bid approach. Just months after arch-rival the AA was taken private in a £1.7bn deal, RAC stock accelerated 10% to an all-time high of 818p, up 76p, giving it a value of about £970m.

Including debt, any bid for the RAC would be likely to have to top £1bn.

In a statement to the Stock Exchange, the company said: 'Further to the recent share price movement, the board of RAC confirms it has received an approach which may or may not lead to an offer.'

Shares in RAC have been motoring since before Christmas when they were trading around 600p. Including today's gain, they have now risen by more than third. City dealers immediately pointed to the Square Mile's venture capital community for potential purchasers.

Top private-equity houses CVC and Permira were behind the £1.7bn buyout of the AA from British Gas group Centrica last June. At the time, a raft of other venture capitalists, including industry giants Kohlberg Kravis Roberts and Cinven, had been knocking at Centrica's door.

RAC is about half the size of the AA but has been desperately attempting to replicate its rival's success of cross-selling a range of financial services products such as car and home insurance to its members.

For almost a century, the RAC was a private members' club and those members received massive windfalls when the business was sold to the vehicle leasing company formerly called Lex.