THE AA motoring organisation was driving towards a stock market listing last night after being sold in a £1.75bn deal.

Energy group Centrica announced an agreement to sell the AA to a company formed by venture capitalists CVC and Permira following a hotly contested private auction.

Thousands of investors are in line for windfall payments after Centrica pledged to use the proceeds to pay a dividend of £1bn and start a share buyback programme.

The news drove shares six per cent higher as investors cheered a sale price that was higher than the £1.5bn expected in the City.

CVC and Permira said the AA would be run as an independent company ahead of a stock market listing within five years.

They also pledged to invest in its roadside services and maintain its public policy role as a spokesperson for the interests of motorists.

The private equity groups have extensive track records for developing well-known brands, including Debenhams, Halfords, Homebase and William Hill.

The acquisition will see Tim Parker stepping down as chief executive of Kwik-Fit - part of the CVC portfolio - to take on the same role at the AA. Sir Trevor Chinn will become chairman, adding to his chairmanship of Kwik-Fit.

Mr Parker described the AA as an iconic brand with an enviable market position.

Although the deal still needs the backing of regulators, Centrica believes the deal will be completed within three months.

The decision to sell the AA reflected the limited opportunity for the motoring organisation to expand overseas.

The sale of the AA will allow Centrica to concentrate on increasing its ownership of electricity generating capacity and gas fields.