Suncorp has sold its Capital Smart crash repair and ACM Parts businesses to AMA Group following a strategic review, with the deal valuing the combined businesses at $440 million.

The insurer will retain a 10% interest in Capital Smart, the second-largest smash repair business in Australia, will have board representation, and has also entered into a 15-year motor services partnership agreement with two five-year options to extend.

“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 CEO Steve Johnston said today.

“Importantly, the agreement maintains Suncorp’s competitive advantage and we look forward to working closely with AMA as an ongoing partner.”

The deal values the total Capital Smart business at $420 million. Suncorp expects to report an after-tax profit on the sale of around $275-$295 million.

ACM Parts will be sold for a cash consideration of $20 million, broadly in line with book value.

Suncorp sold the businesses after calling for interested parties to submit bids.

AMA is rapidly expanding its vehicle repairs business, completing 21 acquisitions and opening four new sites in the past financial year.

Suncorp Insurance CEO Gary Dransfield says AMA has been the largest preferred partner in its repairer network, focusing on severely damaged cars that are not drivable, while Smart takes its name from the small and medium accident repairs that are its specialty.

“Cars are crashing less but when they do have a collision the nature of the damage is more complex,” he told insuranceNEWS.com.au. “We think a partner like AMA that is across the full spectrum of repairs is well placed to manage and deal with that.”

Capital Smart has 50 sites across Australia and New Zealand and last financial year serviced around 179,000 vehicles, according to a presentation by AMA, which will run the business as a stand-alone unit.

The business was formed in 2010 as a joint venture with smash repairer Jim Vais to improve repair times and costs, but Suncorp later took full ownership. Last year it had revenues of $341 million and earnings before interest, tax, depreciation and amortisation of $21 million.

Mr Dransfield says the long-term contractual agreement with AMA will ensure the benefits provided by Smart will continue, while the equity stake also provides visibility.

“We have a lot of confidence that AMA will do a really good job,” he said.

ACM recycles panels and mechanical parts and Smart and AMA are its two largest existing customers in the collision repair market.

Mr Dransfield says Suncorp will update investors on plans for the proceeds after the deal is completed, which is expected by the end of the month.