RAC buys out insurance partner

The Royal Automobile Club of WA has bought Suncorp-Metway Ltd's 50 per cent stake in RAC Insurance, which it originally sold for almost $100 million in 2001.

The price is undisclosed but industry sources suggest the RAC Insurance business was worth between $300 million and $500 million, indicating might have paid as much as $250 million for full control of the business.

The half share was originally bought by Promina, which was then taken over by Suncorp-Metway.

Advised by Gresham Advisory Partners, RAC exercised its right to buy back the 50 per cent stake after the Promina acquisition was finalised, using a clause in the original agreement relating to any change of ownership in its joint venture partner.

The deal with Suncorp will take RAC to full ownership of the insurance company and will represent about 50 per cent of the group's revenue which is forecast to be around $400 million for 2008-09.

Its the second major deal in the past year. In 2007, RAC bought a 49.9 per cent stake in retirement and aged-care business St Ives Group.

RAC chief executive Terry Agnew told WA Business News that the market had changed over the past 10 years since the original process to sell started.

Mr Agnew said industry rationalisation and technology changes reduced the need to have a joint venture partner.

He said RAC conducted a a strategic review of the whole group looking at it direction and long-term sustainability.

"We felt we were able to differenciate ourselves if we wholly owned the business," Mr Agnew said.

"It happened to be at the time we could buy the it back."