Suncorp Group is offloading its Capital S.M.A.R.T. smash repair business to AMA Group for $420 million in a move that will allow the insurance and banking giant to better focus on its core operations.
The Queensland-based firm will retain a 10 per cent stake in the business as well as a seat on the Capital S.M.A.R.T Group Holding entity board, with the transaction expected to be completed by the end of October.
Suncorp said after-tax profit on the sale is expected to be in the range of $275 million to $295 million, while the firm will enter an initial 15.5-year strategic partnership with Capital S.M.A.R.T., which will allow its members access to the business.
“The increasing complexity of repairs is driving significant change in the smash repair and parts procurement industry, and the divestment means Suncorp can focus on its core Insurance and Banking operations,” Suncorp chief executive Steve Johnson said on Tuesday.
Suncorp scrapped its so-called marketplace strategy in August to refocus on banking and insurance, admitting its former chief executive’s plan had confused customers.
The AMA transaction follows a strategic review of the Capital S.M.A.R.T business and evaluation of the long-term outlook.
Suncorp will also sell its auto parts supplier ACM Parts to AMA for $20 million.
AMA shares remained in a trading halt on Tuesday as it announced plans for a $216 million equity raising to fund the deal.
The equity raising will comprise a one for 4.5 pro-rata accelerated non-renounceable entitlement offer to raise about $139 million, and a placement of approximately 67 million shares to raise about $77 million.
Approximately 188 million new ordinary AMA shares will be issued.
“We are excited to combine Capital S.M.A.R.T’s best-in-class capabilities in low to medium severity panel repairs with AMA’s industry leading platform across the smash repair market,” AMA chief executive Andy Hopkins said.
Shares in Suncorp had climbed 0.7 per cent to $13.75 by 1111 AEST while AMA shares were last worth $1.215.