Why the Downer (ASX:DOW) share price is rising today

The Downer share price on the move today as the company announced an update regarding its tyre business. We take a closer look.

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The Downer EDI Limited (ASX: DOW) share price is rising today after the company announced the sale of its tyre business Otraco to the market. Shares in the company are up 1.76% and are currently sitting at $5.49.

The Downer share price has been relatively flat so far this year, returning 0.64% compared to the 5.3% rise in the All Ordinaries Index (ASX: XAO). 

What happened

This morning industrial company Downer announced that it has entered into an agreement to sell its tyre management business, Otraco. The sale of Otraco is to Japanese company Bridgestone for $79 million.

The completion of the transaction, which is subject to regulatory approvals and other conditions, is expected to occur before the end of 2021.

Furthermore, the sale follows Downer’s strategy of divesting its mining business as part of its renewed focus on Urban services.

Management comments

Downer CEO Grant Fenn welcomed the news, saying:

The sale of Otraco follows Downer’s exit from its Underground mining, Open Cut Mining West, Downer Blasting Services and Snowden consulting businesses and also our share in the RTL Mining and Earthworks joint venture.

Potential future sales

The CEO went on to talk about possible future sales, as the company looks to continue its divestment in its mining businesses.

According to the release the company is in ongoing discussions to sell its open cut mining business. Fenn stated that a number of parties are interested.

Moreover, the sale follows a number of large recent deals, which will deliver total proceeds of $605 million when concluded. To date $476 million has been received.

About the Downer share price

Downer is a services provider based in Australia and New Zealand. Listed on the ASX in 1998, the company is also a member of the S&P/ASX 100 Index (ASX: XTO).

The company’s shares have been performing well in the last month on the back of a large contract win. As such, the Downer share price is up 7% for the period.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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