Here's why Nine Entertainment Co Holdings Ltd shares have soared 9%

Shares of Nine Entertainment Co Holdings Ltd (ASX:NEC) have soared as much as 9% today following a market sensitive announcement.

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Shares of Nine Entertainment Co Holdings Ltd (ASX: NEC) soared as much as 9.7% higher today, following a media release this morning.

In an announcement to the ASX, the company said it has signed an agreement to offload its Nine Live touring and events business to interests advised by Affinity Equity Partners, for an enterprise value of $640 million.

The deal will enable NEC to move into a strong net cash position."The sale of the business provides an attractive outcome for NEC shareholders, releasing significant proceeds to enable enhanced shareholder returns while retaining substantial financial flexibility," the company's media release stated.

The sale is expected to complete on 31 July 2015 and will amount to net proceeds of approximately 64 cents per share.

NEC shares closed Wednesday at $2.15 but traded at $2.30 around midday today. The following paragraph is likely to have investors most excited about the deal.

"Subject to alternative uses of capital, it is the Board's intention to increase returns to shareholders through an ongoing program of on-market share buy-backs, incremental to the $150m program announced in February, and effective from the FY16 interim dividend, to sustainably increase the annual dividend payout ratio to 80-100% of Net Profit after Tax (pre Significant Items), the majority of which is expected to be franked."

In 2014, Nine Live accounted for around 15.6% of the group's earnings before interest, tax and corporate costs. Meaning, the dividends shareholders receive in the years ahead may be significant.

Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned. Owen welcomes your feedback on Google plus (see below) or you can follow him on Twitter @ASXinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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