AMA Group is to demerge its automotive component, accessory and procurement business and enter a $508M transaction with Blackstone for the vehicle panel repair business.
The group announced today via the ASX that it entered into two transactions which will lead to:
- The demerger of its automotive component, accessory and procurement business (ACAD Business) and:
- The subsequent purchase of the post-demerger AMA Group and its remaining vehicle panel repair business (Panel Business).
The release says the rationale behind this demerger is:
- To allow each business to adopt a capital structure that is most appropriate for its scale operations and strategic objectives.
- To enable the ACAD Business to gain access to new capital sources to exploit growth opportunities
- To allow management of each business to foucs on the core competencies of the separate businesses.
The release goes on to say: 'Importantly, as part of the demerger process, the consumables and parts procurement function (“Procurement Business”) of the panel repair business will become part of the ACAD Business, reflecting the true nature of the operation. This procurement capability has delivered significant cost savings for the panel business’s major customers, the auto insurance companies, and has in turn, driven the rapid growth of the panel business. AMA considers that the potential to expand future revenue streams for the ACAD Business are promising and it is well positioned to benefit from global opportunities.'
Malone leaves panel business
AMA Executive Chairman, Ray Malone, said “Today is an important point in the development of AMA Group. The Board has decided to address the challenge of funding two growing but distinct businesses by separating the ACAD Business in to a new ASX listed company; with each business having its own management team, growth plans and funding strategy. This separation will ensure that neither business has its prospects limited by the competing demands of the other business for board and management attention and financial resources. Each business will be able to realise its full potential with significant benefits to customers, employees and shareholders.
“I am especially excited about the prospects of the new Procurement Business. AMA Group is truly a global leader in sourcing consumables for the vehicle panel repair industry. This is reinforced by our well advanced discussions with a number of large international vehicle panel repair industry consolidators about servicing their consumables and parts needs. Based on the significant potential cost savings for international vehicle panel repair operators, we expect to rapidly grow this new business.”
The Blackstone proposal
The release says: 'If the Demerger is approved by shareholders and the Court, AMA has agreed to implement the Blackstone Proposal. Under the Blackstone Proposal, the shareholders of AMA Group will have their shares in the remaining AMA Group (which will then be the holding company of the Panel Business) acquired by Blackstone advised funds for 86 cents per share, which equates to an enterprise value of A$508 million or 10.7x projected pro forma normalised EBITDA for the year ending June 30, 2018.
The total enterprise value assumes deferred acquisition consideration and net debt for the AMA Group of $72m (less $22.5 million which will be assumed by the demerged ACAD Business).
Andy Hopkins stays on as CEO
AMA Group Vehicle Panel Repair CEO, Andrew Hopkins, who will continue as CEO of the Panel Business after an acquisition by Blackstone, said: “Over the past two years, we have rapidly grown our vehicle panel repair operations to over 100 sites and in the process fundamentally changed the way the industry engages with its primary customers, the automotive insurance companies, to the ultimate benefit of their customers, the insurance policyholders. Taking the business private will increase our senior management team’s focus and allow us to further improve our cost competitiveness; in the process, strengthening our insurer customer relationships. Throughout the transaction diligence
period we have been very impressed by Blackstone’s level of understanding of our business and their willingness to embrace our plans for growing and improving the operations. We are excited about them partnering with us for the next stage of our development.”
Blackstone Managing Director, Jonathan Chamberlain, said “We are excited about investing in Australia’s leading panel repair network, and to be partnering with Andrew Hopkins and the management team. As the owners of one of the leading panel repair businesses in the United States, Service King, Blackstone understands the industry and the opportunities and challenges ahead for the business.”
The demerger is planned for August 2018.
You can download AMA demerger summary here.