In morning trade the Eclipx Group Ltd (ASX: ECX) share price has pushed higher following the announcement of an asset divestment.
At the time of writing the salary packaging and fleet management company's shares have climbed 0.5% to $1.62.
What did Eclipx announce?
This morning Eclipx announced that it has sold its non-core Commercial Equipment Finance Australia business to Grow Asset Finance for $14.6 million.
Eclipx Commercial Equipment Finance Australia provides finance solutions for businesses of all sizes to enable them to lease or finance IT, office and manufacturing equipment.
According to the release, the sale consideration represents a marginal premium to net tangible assets and is expected to close in the coming days. Management intends to use the net proceeds of the sale to reduce its corporate debt.
However, the sale will result in an accounting loss of approximately $15 million, relating predominately to the write-off of deferred tax and intercompany loans. Pleasingly, the company's corporate debt lenders have agreed to exclude this loss from covenant testing at the next test date.
The release also advises that the transaction includes limited transitional services arrangements for a period of up to one year, with the cost of these services being borne by Grow Asset Finance.
Eclipx's CEO, Julian Russell, said: "The sale of Commercial Equipment Finance Australia is an important step in Eclipx's previously announced simplification plan, and contributes to our key objectives of reducing corporate debt and group complexity."
Should you invest?
Whilst this is a positive for Eclipx, I wouldn't make an investment purely on this news.
If you think that Eclipx is over the worst of its issues now then it could be worth considering a small investment, however I intend to wait for its performance to improve materially before taking another look at the investment opportunity.
In the meantime, I think fellow beaten down shares Citadel Group Ltd (ASX: CGL) and Helloworld Travel Ltd (ASX: HLO) would be better options for investors looking for undervalued shares.
