The Flight Centre Travel Group Ltd (ASX: FLT) share price is flying higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) travel stock closed yesterday trading for $11.09. In early morning trade on Wednesday, shares are changing hands for $12.03 apiece, up 8.5%.
For some context, the ASX 200 is up Xx% at this same time.
Here’s what grabbing investor interest today.
Flight Centre share price leaps on $61 million deal
The Flight Centre share price is taking off today after the company announced that it had entered into a binding agreement to divest its shareholding in the Pedal Group joint venture (JV).
Flight Centre intends to sell its 47% interest in the JV to the Turner Collective for $61.7 million. If you’re unfamiliar with Pedal Group, the company consists of the 99 Bikes retail chain and wholesaler Advance Traders Australia.
The divestment remains subject to Flight Centre shareholder approval and regulatory conditions. However, management expects the deal to complete in May.
Flight Centre’s independent directors unanimously support the transaction, stating that it represents a further step in the company’s ongoing portfolio simplification and strategic reallocation program.
Should the deal go through, management expects to realise an accounting gain of around $15 million on the sale. They said that the resulting capital gain is likely to be fully offset by existing revenue and capital losses, with no cash tax payable on the sale.
What did management say?
Commenting on the $61.7 million divestment that’s helping lift the Flight Centre share price today, non-executive chairman Gary Smith said, “Pedal is a strong business with a loyal and engaged customer base, and we are proud of what has been built through the joint venture.”
Smith added, “We believe the Turner Collective is well placed to support Pedal’s next phase of growth.”
As for the company’s broader simplification strategy, Smith concluded:
This divestment follows the sale of our Cross Hotels and Resorts business and reflects FLT’s disciplined approach to capital allocation and portfolio simplification. The transaction crystallises a strong return on our investment and enhances our capacity to invest in our core global travel businesses and future growth initiatives.
Flight Centre share price snapshot
Since hitting a one-year close highs of $16.45 on 3 February, the Flight Centre share price has come under heavy selling pressure.
With today’s large rebound factored in, shares in the ASX 200 travel stock remain down 20% year to date and down 26.9% since the recent 3 February highs.
The post Why is the Flight Centre share price soaring 9% on Wednesday? appeared first on The Motley Fool Australia.
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More reading
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.