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Friday, October 8, 1999 Published at 09:52 GMT 10:52 UK

Business: The Company File

Direct Line buys Green Flag

The battle to help stranded motorists is heating up

Insurance group Direct Line is to buy the roadside recovery group Green Flag for £220m.

Direct Line, a subsidiary of the Royal Bank of Scotland, has built its buiness by selling insurance via the telephone. It is best known for its motor insurance business.

[ image: There had been plans to merge with the RAC]
There had been plans to merge with the RAC
It bought Green Flag from US investment group Cendant, which put the service up for sale in May.

Cendant had been blocked by regulators in its £450m bid for Green Flag's larger rival, the RAC.

Green Flag, based near Leeds, is the third largest roadside recovery business in the UK with 2.5 million customers, or 12.5% of the market.

Direct Line launched its own recovery business - Direct Line Rescue - in May 1998 and has since attracted 330,000 customers.

Third party leader

The acquisition will be subject to approval from regulators.

Although it is in third place in the overall market, Green Flag is the market leader in provision of roadside assistance through third parties such as motor manufacturers and financial institutions.

[ image: Green Flag's assistance failed to rescue Glenn Hoddle's England team]
Green Flag's assistance failed to rescue Glenn Hoddle's England team
It used sponsorship of the England football team as part of its efforts to take on its more established rivals, the RAC and the Autombile Association (AA).

Sir George Mathewson, chairman of Direct Line and group chief executive of the Royal Bank of Scotland, said: "Green Flag is the most efficient and cost effective operator in the in- dustry.

"Combine this with the powerful Direct Line brand for consumer direct business and the Green Line brand for third party business and we make a very strong competitor for AA and RAC."

The takeover of Green Flag comes as the roadside recovery industry is in the midst of a major overhaul with both the RAC and the AA agreeing to bids.

The RAC was bought by car leasing company Lex Service for £437m and AA members have recently voted to accept an offer from gas supply company Centrica for £1.1bn.

Green Flag, which was founded in 1971, has 750 staff.

It is the second time in less than 18 months that it has changed hands. Cendant bought the company in May 1998 as part of its acquisition car parks group NCP.

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