In morning trade the Ardent Leisure Group (ASX: AAD) share price has climbed 5% to $1.82.
This reduces its year-to-date decline to approximately 22%.
Why are its shares higher?
This morning Ardent Leisure announced the sale of its Bowling & Entertainment division to The Entertainment and Education Group (TEEG) for $160 million on a debt and cash free basis.
According to the release, management has decided to divest the division as they believe it is an attractive price and the funds can be reinvested in other areas where it can earn the most attractive returns.
Furthermore, although the division's recovery had been going well and management was confident in its turnaround, it still would have required significant investment to see the strategy through.
This sale relieves the company of any further investment and allows it to focus on its expansion of the Main Event chain in the United States and the recovery of its Theme Parks division.
Did they get a good deal?
I think Ardent Leisure has done well from this deal and, judging by the share price gain, the market appears to agree.
After all, the sale price represents an attractive multiple of approximately 27x FY 2017 Core EBITDA less routine CAPEX and 32x FY 2017 Core EBIT.
Should you invest?
I suspect that this may not be the last divestment the company makes. All being well, if the company can get its theme parks businesses back up to scratch, it may also be able to offload them to private equity in the future.
This would leave the company with just its lucrative Main Event business and its real growth engine.
Due to the U.S. election last year and disasters this year, the business has underperformed expectations. But I remain confident that it will find its feet in 2018 and resume its rapid growth.
This could arguably make it worth considering a patient buy and hold investment in Ardent Leisure today ahead of industry peer Village Roadshow Ltd (ASX: VRL).
