Centrica sets up £1.5bn AA auction

The AA was today said to be the subject of a £1.5bn (€2.2bn) auction after reportedly failing to win a place in owner Centrica’s long-term plans.

The company, which also owns the British Gas and One.Tel brands, declined to comment on the speculation, which claimed Centrica was looking for a buyer in order to fund acquisitions in the energy sector.

The Sunday Express said it had been told that chief executive Sir Roy Gardner no longer viewed the breakdown and financial services operation as a core element of Centrica’s longer-term strategy.

The company paid £1.1bn (€1.6bn) for the AA six years ago and has seen the business perform strongly with profits up 27% to £93m (€141m) last year. As well as 15 million members, the AA is a leading insurance intermediary in the UK with around 1.6 million home and motor insurance policies in force.

As a result, potential buyers could come from the insurance sector, although analysts said that a price tag of £1.5bn-plus (€2.2bn) may need to be met.

The sale of the AA would enable Centrica to increase its focus on its core utilities and home services interests, as well as raise the possibility of returning cash to shareholders.

Earlier this month Centrica paid £142m (€216m) for the Killingholme power station near Grimsby in a move that further cushioned the British Gas business against future swings in energy prices.