AMA has entered into a 25-year service agreement under which the Capital SMART business will remain as the ”recommended repairer” for Suncorp vehicle policy holders.
Mr Hopkins expects to be able to pull out $17 million of annual synergies by the end of 2020-21, through cost savings stemming from both businesses being under the same roof.
But one-off implementation costs of integrating the two companies are expected to be $15 million.
The two businesses already had a close relationship, and Mr Hopkins said it was a ”strategically compelling” move.
The $216 million capital raising comprises a 1-for-4.5 accelerated non-renounceable entitlement offer to raise $139 million, and a placement to raise $77 million.
The new shares are being issued at $1.15 per share. AMA shares last traded at $1.215 before the company entered a trading halt on September 30.
The crash repairs industry is still highly fragmented, with AMA estimating that about 3,000 outlets are still owned by smaller ”mum and dad” operators or small business people. With 200 outlets, AMA estimates it holds a market share of 10 per cent.
The smaller ”mum and dad” operators are finding it increasingly difficult to fund the heavy investment required to keep up with the highly complex nature of modern vehicles, with hi-tech computing a central part of those models, making them difficult to repair when collisions occur.
Suncorp Group chief executive Steve Johnston said the industry was changing fast.
“The increasing complexity of repairs is driving significant change in the smash repair and parts procurement industry,” he said.
The transaction price of $420 million represents an earnings before interest, tax, depreciation and amortisation multiple for 2018-19 of 20 times.
AMA has also acquired the ACM Parts business from Suncorp for an additional $20 million. ACM Parts supplies parts to the smash repair industry.
AMA on September 1 appointed former Suncorp Insurance chief executive Anthony Day as its new chairman.
AMA Group, which had a sharemarket capitalisation of $660 million prior to the Capital SMART acquisition, has been steadily consolidating parts of the industry, which analysts estimate has been growing by about 4.8 per cent annually in the past eight years. AMA had a market capitalisation of just $20 million in 2010.
AMA itself was in trouble in 2007 when Mr Malone took effective control of the company and injected financial discipline into the group before embarking on a growth strategy. He had intimate knowledge of the crash repair industry and was the original founder of a ‘Mr Gloss’ panel repair business in 1984.
Private equity group Blackstone was on the verge of buying AMA last year in a $500 million-plus deal, but that purchase was abandoned after a negative ruling from the Australian Taxation Office on de-merger relief.
