The broadcaster, citing a source, said deal was being finalised and could still fall through. It added that the listing would value the motoring services firm's equity at about 1.3 billion pounds ($2.18 billion). (http://link.reuters.com/bap89v)

Sky said 10 institutional investors had been lined up to buy substantial stakes in the AA, naming Aviva Investors, Blackrock Inc, JP Morgan Asset Management, Lansdowne Partners and Legal & General Investment Management as some of the deal's backers.

Sky's source also said Bob MacKenzie, a former boss of car insurer Green Flag, was slated to become the AA's new chairman.

The parent company, Acromas, declined to comment, while the AA could not be reached for comment outside of regular business hours.

Acromas, which is owned by private equity firms Charterhouse [CHCAP.UL], CVC [CVC.UL] and Permira [PERM.UL], was created in 2007 at the peak of the buyout boom by the 6.2 billion pounds merger of the AA and British travel and insurance company Saga Plc.

Saga's shares have performed worse than initially expected since their market debut last month as the market for flotations in London has lately become more turbulent.

In other flotations, Greetings card retailer Card Factory saw its shares decline after the start of dealings and fashion retailer Fat Face pulled its flotation plans a day before Saga's debut.($1 = 0.5956 British Pounds)

(Reporting by Richa Naidu in Bangalore)