LEX Service is to buy RAC Holdings for £437million, creating a leader in the motoring services market. The recommended cash offer is virtually certain to be approved by both companies' shareholders - Lex Service's share price jumped 93p to 587 1/2p following Friday's announcement - with the deal expected to be completed by early July.

Following the acquisition, Lex will comprise three divisions: motoring services under the RAC brand; business services comprising vehicle management through Lex Vehicle Leasing, mechanical handling and inventory management businesses under the Lex brand; and vehicle importing and retailing through its own dealership network and Hyundai Car (UK).

Lex is understood to believe that, with the RAC as part of the enlarged Lex group, efficiency gains and synergy benefits of at least £30million a year can be achieved by 2002. The RAC's development programme, which particularly focuses on the potential for telematics and includes a 50/50 joint venture with Trafficmaster, will be another focus for growth. Lex Service chief executive Andy Harrison said: 'This is a terrific opportunity for Lex. The RAC is one of the strongest and most respected brands in the UK and fits very well with our existing businesses.