Origin shares rise 7pc on back of €93m deal to sell stake in marine oil venture
SHARES in Origin Enterprises rose more than 7pc yesterday after the company said it would sell off its stake in a marine oil joint venture.
The deal is said to be worth about €93m at current exchange rates.
Origin is looking to offload its 50pc share in the Welcon joint venture to its partner in the business, Austevoll Seafoods. Assuming the deal is cleared by regulators, it will close in the second half of 2013.
"The transaction represents an important streamlining of Origin's business profile in line with our commitment to prioritise the allocation of capital for the expansion and development of the group's agri-services business,'' said Origin boss Tom O'Mahony.
Welcon was formed in February 2009 after Origin and Austevoll merged their Irish, UK and Norwegian fishmeal and fish oil operations.
Analysts were broadly positive about the deal, saying it would allow the company to focus on its agri-services business.
"Post-disposal, Origin will have net cash on its balance sheet and an annual free cash flow of circa €50m," said Davy's Cathal Kenny. "The deal affords Origin impressive levels of financial flexibility for internal and external investment. As expected, the statement notes that proceeds will ultimately be reinvested in the agri-services business.
"Smart capital allocation has been a cornerstone of Origin's development since it became an independent public company. We view today's announcement as a positive development and continue to recommend the shares."
Goodbody's Liam Igoe took a similar view, claiming it "better positions the business strategically".
"Origin is currently trading at a discount to agri-food companies on a price-to-earnings basis.
"Given the prospect for high single-digit earnings growth and a balance sheet that provides scope to grow the dividend as well as invest in the business, we believe such a discount is unwarranted.
"As a result we believe this valuation gap will close in the coming months," he added.
By the close in Dublin, Origin was up 7.6pc at €5.65.
The shares are up 36pc in the year so far, more than double the ISEQ Overall Index.