Cardno (ASX:CDD) share price rockets 20% on $500 million deal

Cardno shareholders could be set for a massive payday after this sale…

| More on:
Vanadium Resources share price person riding rocket indicating share price increase

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Cardno Limited (ASX: CDD) share price has launched itself into the stratosphere on Friday. This move follows news of the company selling multiple divisions to Canada-based engineering services company, Stantec Inc (NYSE: STN).

At the time of writing, shares in the infrastructure and services company are exchanging hands for $1.525, up 17.8%. However, the company’s shares had opened at an intraday high of $1.60.

Let’s take a look at the deal that has catapulted the Cardno share price today.

Pocketing $500 million in division sales

In a release made well after the market close last night, Cardno revealed the details of an agreement with the much larger services company, Stantec. In early trade, investors are bidding up the Cardno share price in response.

According to the release, Cardno has entered into share sale agreements to sell its Americas consulting division and its Asia Pacific consulting division to Stantec. The agreed-upon consideration for the two consulting divisions is US$500 million, or roughly A$667 million.

To the delight of shareholders, the company intends on distributing between A$567 million to $600 million of the proceeds to Cardno shareholders. This would equate to somewhere between $1.40 to $1.49 per share, depending on the decision. The distribution will be comprised of a mix of capital return and an unfranked dividend.

Additionally, Cardno plans to retain approximately A$64 million of cash from the division sales. The capital will be used to support the remaining International Development and South American operations. Pleasingly, Cardno will have a clean balance sheet following the transaction, holding no debt. This is likely another contributing factor to the positive Cardno share price move today.

Furthermore, the deal had been struck following the company’s extensive global strategic review. This undertaking was announced to the ASX on 9 June 2021. Reportedly, a notable number of international groups opened Cardno’s books and took a squizz.

From here, the transaction remains conditional on a handful of details. For example, the deal will need approval from shareholders at Cardno’s upcoming extraordinary general meeting. This meeting is expected to be held on 6 December 2021.

In the meantime, the Cardno board unanimously recommends shareholders vote in favour of the transaction.

Management commentary

Commenting on the transactions, Cardno CEO Susan Reisbord stated:

I am excited about the opportunity for Cardno’s Asia Pacific and Americas Consulting Divisions to become part of Stantec, a top tier consulting firm that is recognized for creative technology-forward thinking and collaboration. This is not simply a great culture fit for our Cardno Asia Pacific and Americas Consulting Division teams, this merger provides new career opportunities for staff, additional resources and services for our clients, and a new platform for combined growth in the marketplace.

Likewise, Stantec CEO Gord Johnson highlighted the companies cultural compatibility. Specifically, both the services and geographies are highly complementary.

Cardno share price snapshot

The Cardno share price has been an exceptional performer over the last year. In fact, it is likely up there with some of the best performers on the ASX over the 12 month time period. While the S&P/ASX 200 Index (ASX: XJO) has delivered a return of 20% in the last year, Cardno has soared 346%.

At the current share price, Cardno is trading on a trailing price-to-earnings (P/E) ratio of 16.4 times.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Industrials Shares

Smiling man sits in front of a graph on computer while using his mobile phone.
Industrials Shares

Here’s why Transurban shares are this fund manager’s top holding

Transurban has rallied on the ASX this year with its share price rising 4% over the first half of 2022.

Read more »

Five workers working on a task in a warehouse.
Industrials Shares

Brambles share price rises amid $1 billion investment decision

Brambles has demonstrated the power of saying 'no' in an announcement to the ASX.

Read more »

navy ship on the water representing austal share price
Industrials Shares

Why is the Austal share price sailing 28% higher today?

Austal shares are torpedoing the ASX today.

Read more »

Man with his head on his head with a red declining arrow and A worried man holds his head and look at his computer as the Megaport share price crashes today
Industrials Shares

Why is the Electro Optic Systems share price hitting a new 52-week low?

Selling pressure has rolled over into today's session after Wednesday's collapse

Read more »

Legs and feet of two people wearing green gumboots standing in a flooded room ready to clean up.
Industrials Shares

Cleanaway share price slides amid revised costs from flood damages

Cleanaway's having to clean up its Ipswich site after the floods.

Read more »

a woman wearing green and sitting in a green room with a green coffee cup puts her hand to her forehead in dismay while looking at papers sitting at her computer.
Industrials Shares

Why the Smartgroup share price is tumbling 12% today

A longstanding top 20 client contract is up in smoke...

Read more »

A man holding a packaging box with a recycle symbol on it gives the thumbs up.
Share Gainers

Close The Loop share price rockets 24% on guidance boost

A more positive outlook for the company has investors biting today.

Read more »

A group of disappointed board members.
Industrials Shares

Johns Lyng share price slides following $13m of insider selling

Johns Lyng provided a share trading and business update today.

Read more »