GIC picks up RAC stake from Carlyle

The firm halted IPO plans to sell half its stake to Singapore’s sovereign wealth fund

The Carlyle Group has decided not to pursue a stock market float of RAC, instead agreeing to sell half of its stake in the roadside assistance provider to Government Investment Corporation, Singapore’s sovereign wealth fund.

The transaction is thought to value RAC at around £2 billion ($3.2 billion, €2.5 billion). According to media reports, as well as returning capital to investors from the partial sale, Carlyle would look to return money to LPs through a dividend recapitalisation.

Carlyle and GIC will jointly own a majority stake in the company, with RAC management holding the remaining shares, according to a joint statement from all three parties. The precise stakes of Carlyle and GIC are unclear. Carlyle declined to comment, while GIC did not return a request for comment at press time.

It is understood that GIC fought off competition from several other interested parties. “Both Carlyle and GIC believe that RAC has a clear strategy with significant growth potential,” Carlyle partner Andrew Burgess said in a statement. “GIC will provide a solid partnership for the business.”

Carlyle acquired the RAC from insurance group Aviva in 2011 in a £1 billion deal using capital from Carlyle Europe Partners III, a €5.4 billion buyout fund raised in 2006.

Since acquisition, Carlyle said it has invested more than £40 million into the business to “strengthen the operational capabilities and reinvigorate the brand.” Carlyle and the management team have also upgraded the IT systems and invested in the development of a sales and marketing database. RAC’s net revenue has increased from £433 million in 2011 to £486 million in 2013, with EBITDA up from £95 million in 2011 to £145 million in 2013, according to the company’s 2013 annual report.

According to information on the firm’s website, Carlyle has exited four investments from its Europe Partners III fund, including money handling business Talaris, which it sold in 2012 for £650 million, returning almost four times the firm’s original investment.

Carlyle and the RAC were advised by Lazard & Co, Barclays Bank, Goldman Sachs and Linklaters, with J.P. Morgan Cazenove, Citigroup Global Markets, Bank of America Merrill Lynch, BNP Paribas, and Latham and Watkins also providing advice. GIC were advised by Nomura and received legal advice from Freshfields, according to the joint statement.