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Kwik-Fit, Halfords parent CVC named as front runner in bid for AA business

The AA could be combined with fast-fit chain Kwik-Fit and parts/ accessories supplier Halfords to forge a powerful new group in UK automotive sales and aftersales.

Centrica plc, owner of British Gas and the UK’s largest gas supplier, ended a week of press speculation by announcing it was “in preliminary discussions” to sell the AA.

In September 1999, Centrica paid £1.1bn for the organisation and is now thought to be seeking offers in excess of £1.5bn. Last year, AA profits rose by 27% to £93m.

Centrica confirms interest has been expressed in the AA but will not give any further details. Business and City speculation puts CVC Capital Partners among the front runners. The closing date for bids was Friday, June 25.

In 2002, CVC – a venture capital group with powerful financial backing – paid Ford Motor Company £350m for Kwik-Fit, a third of the price the carmaker paid to founder Sir Tom Farmer three years earlier.

Jacques Nasser, when he was running Ford, acquired Kwik-Fit as a key part of his strategy to create a ‘cradle to grave’ automotive group. Ford later back-pedalled on the approach and Nasser left.

CVC also owns Halfords and will see the opportunity to integrate vehicle sales, repair and servicing interests, together with a link to insurance. Once again, the AA’s database is one of the most valuable aspects of the deal.

One reason Centrica bought the AA was to exploit the sales potential of its database. AA membership has increased from 9.5m to around 15m and the organisation is a leading insurance intermediary, providing around 1.6m motor and home insurance policies.

Centrica has sharpened AA marketing with its ‘just AAsk’ slogan and exploited the links from businesses and families to the sale of power, insurance, roadside breakdown assistance and other leisure products. Now Centrica wants to concentrate on its core business of power provision but is said by analysts to be cash-rich and in no rush to sell. “If the right buyer and price comes along now, the AA will be sold,” says one.

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