UPDATE 2-Centrica sets Friday deadline for AA bids-sources


(Adds Centrica and bidders' no comment, details, share price)

By Siobhan Kenneday

LONDON, June 24 (Reuters) - Energy utility Centrica Plc has set a Friday deadline for final bids in the sale of its Automobile Association unit, which could fetch as much as 1.5 billion pounds ($2.72 billion), sources close to the matter said on Thursday.

Three private equity firms are expected to submit offers for the roadside rescue and motoring services unit, including U.S. giant Kohlberg, Kravis, Roberts (KKR), CVC Capital Partners and Permira. One source said CVC and Permira were bidding together.

The bidders and Centrica declined to comment.

Other buyout firms, including Cinven and The Blackstone Group, had been hoping to join the auction, which was first made public on Monday. But it has since emerged that Centrica is running a restricted bid process, whereby only KKR, CVC and Permira have been invited to submit offers, the sources said.

"I think there are some pretty cheesed-off people out there who don't understand what Centrica's doing," said one person close to a private equity bidder that has been refused entry.

The sources said Centrica was only talking to those private equity firms which already owned assets that would compliment the AA. CVC, for example, owns Kwik-Fit, the car tyre-fitting, parts and insurance firm.

Other sources tipped KKR as the frontrunner as Centrica's chairman, Roger Carr, is a senior adviser to KKR.

Centrica said earlier this week it was in early talks about selling the firm, which it acquired about five years ago for 1.1 billion pounds. UK broker Cazenove [CAZ.UL], which sold the AA to Centrica first time around, is acting as financial adviser on the sale.

The AA provides home and motor insurance as well as roadside services and is UK market leader. But Centrica -- once part of Britain's state-owned gas industry -- has said it wants to balance its leading UK position in electricity and gas provision by buying more power stations and gas assets.

Earlier this month, for example, it acquired Killingholme power station in Lincolnshire.

Sources familiar with the matter have said the AA sale would help Centrica pay for more energy assets, while some of the proceeds may also be returned to shareholders.

Membership of the AA has grown to 15 million from 9.5 million at the time of its acquisition by Centrica. It contributed operating profit of 93 million pounds to group operating profit 897 million pounds in 2003.

(Additional reporting by Andrew Callus)



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