The Helloworld Travel Ltd (ASX: HLO) share price is soaring higher this morning. It comes after the company announced a major asset sale.
It has agreed to palm off its corporate and entertainment travel businesses in Australia and New Zealand. Corporate Travel Management Ltd (ASX: CTD) will pay $175 million to take on the businesses.
At the time of writing, the Helloworld share price is $2.53, 10.48% higher than its previous close.
Let’s take a closer look at today’s news from the global travel company.
Helloworld share price takes off on asset sale
The Helloworld share price is gaining after the company announced it’s selling its corporate and entertainment travel businesses just as they start to benefit from the COVID-19 rebound.
The sale will see the company with more funds to boost its other businesses towards pre-pandemic activity levels.
Corporate Travel Management has agreed to pay $100 million in cash and $75 million in scrip for the assets. After the sale, the scrip will be escrowed for 12 months.
According to the company, the sale represents “strong value creation” following a period of contract wins and extensions in its corporate business.
Helloworld will use the money to repay its debt. The sale will bring its total liquidity to $155 million and increase its cash holdings to $85 million.
It will, therefore, support growth opportunities in the company’s retail and leisure travel businesses.
It also expects the funds will allow the company to profit on pent-up demand for travel and high household savings once borders fully reopen.
The soon-to-be-divested businesses brought in around $22 million of pro forma normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) in financial year 2019.
Following the transaction, the company will keep working on its leisure and corporate travel networks, air consolidation business, wholesale and inbound businesses, and its logistics business.
The sale is set to be completed in the first quarter of 2022. It’s subject to several conditions, including regulatory approvals.
The company’s share price could also be gaining on news of a strong November.
Helloworld brought in $94.8 million of non-corporate total transaction value last month. That’s 50.5% more than it did in October 2021 and 191.7% more than it did in November 2020.
What did management say?
Helloworld CEO and managing director Andrew Burnes commented on the sale driving the company’s share price higher today:
While our corporate and entertainment travel businesses are in the early stages of benefiting from the COVID-19 rebound, we believe this transaction is at a compelling valuation to maximise Helloworld shareholder value and that will allow Helloworld to focus on operations which, pre COVID-19, represented 80% of our [total transaction value].
Helloworld share price snapshot
Today’s gains haven’t been enough to boost the Helloworld share price back into the long term green.
Right now, the company’s stock is trading for nearly the same price it opened at on the first day of trade in 2021. It has fallen 6.6% since this time last month.
The post Helloworld (ASX:HLO) share price surges 10% on $175m asset sale appeared first on The Motley Fool Australia.
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More reading
- Why is the Corporate Travel Management (ASX:CTD) share price halted?
- Why have investors been saying goodbye to Helloworld (ASX:HLO) shares lately?
- Why is the Helloworld (ASX:HLO) share price tumbling 6% on Friday?
- Here’s why ASX 200 travel shares are getting hammered today
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool Australia has recommended Corporate Travel Management Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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