Investors can expect Telstra Corporation Ltd (ASX: TLS) shares to open higher on Monday morning after the group announced to the market late on Friday night (at 7:12 pm) that it had agreed to sell a 47.7% stake in Chinese online business Autohome for $2.1 billion.

Here are the details that we know so far:

  • Telstra has entered an agreement with Ping An Insurance Group
  • The sale price has been struck at US$29.55 a share which represents a 12.7% premium to the volume weighted average price of Autohome over the past 60 days
  • Telstra will retain a 6.4% interest in Autohome
  • Telstra is expected to book an accounting gain of $1.8 billion on the sale of Autohome in its second half results. A superb return considering the original investment was only made in 2008.
  • CEO Andy Penn noted that Telstra “will take a balanced approach in considering the use of these funds, which includes potential capital management options.”

Now What:

Telstra’s share price closed Friday’s trading session at $5.24 which is only around 5% above its 52-week low of $4.98.

Telstra remains a key income stock for many investors boasting a fully franked dividend yield of close to 6%.

The stock also looks attractively priced on a price-to-earnings multiple of around 15 times.

With a domestic market leadership position, asset experience which is resulting in Telstra playing a key role in the nbn rollout, and significant cash inflows from Autohome, the prospects for Telstra’s business performance over the coming years appears to be reasonable.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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.