Diversified industrial group, Alesco Corporation saw its shares have their best day for months yesterday when it revealed the sale of a key asset and plans to restart paying dividends.
Alesco said it had agreed to sell its scientific and medical division (Biolab) to Thermo Fisher Scientific for $175 million.
Dividends will follow, but the size of the payment is yet to be advised, the company indicated.
The shares jumped more than 13% at one stage in yesterday’s bullish market before closing 12% higher at $3.09: a gain of 34 cents on the day.
Alesco, which distributes hardware, construction equipment, scientific instruments and irrigation systems, told the ASX in the statement that it expects a profit on the sale, before tax but after transaction costs, of about $65 million, with the proceeds being used to cut debt and strengthen the company’s balance sheet.
Alesco said that since it would have a significantly stronger balance sheet after the sale, the company intended to resume paying dividends.
"However, a decision on the quantum of the 2009 full year final dividend will not be made until the company’s 2009 full-year audited results are finalised and will be considered in light of the business outlook at that time and prevailing external conditions," the company said.
"This sale substantially strengthens Alesco’s financial position allowing us to accelerate investment in our remaining businesses and further improve their operational efficiency and financial performance," Alesco chief executive Justin Ryan said.
"This will ensure Alesco is well positioned to benefit from the recovery of the residential housing cycle and the overall economy."
The transaction is unconditional and expected to be completed on Thursday of this week (April 30, 2009).
The sale has the agreement of the company’s lenders.
Alesco said the sale of Biolab would enable the company to reduce its current committed banking facilities from $410 million to $270 million.
Upon completion of the sale, Alesco’s net debt will be down to about $170 million and gearing will be about 23.3% – down from 36.8% at November 30, last year.
Interest cover will improve from 4.8 times for the 12 months to November 2008 to a proforma forecast of 6.6 times for the 12 months to May 31, 2009.
"Alesco now intends to review its overall banking arrangements in conjunction with its lenders in light of its significantly reduced gearing level," the company said.
The company said it would update shareholders on its banking arrangements when it releases its 2009 full year financial results on July 28.
Alesco will also reduce its existing interest rate hedges.
The cost of current hedge positions will be up to $15 million before tax and will be treated as a significant item in the year-end accounts.
Mr Ryan said the sale of Biolab to Thermo Fisher was the next natural step for the international expansion of the Biolab business.
Thermo Fisher Scientific develops and manufactures instruments, equipment, consumable and software for the life sciences and healthcare markets.
