The Computershare Ltd (ASX: CPU) share price is avoiding the market selloff on Tuesday.
In morning trade, the ASX 200 stock is up 1% to $25.99.
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Why is this ASX 200 stock rising?
Investors have been buying the share registry company's shares after it released a positive announcement.
Computershare has announced a definitive agreement to sell its U.S. Mortgage Services business to Rithm Capital Corp for an estimated consideration of US$720 million (A$1.1 billion). This values the business at approximately 1.0x tangible net asset value.
According to the release, the ASX 200 stock decided to sell the business after completing a detailed review. That review determined that a full divestment of the business via a competitive process would be in the best interests of shareholders.
Computershare's CEO, Stuart Irving, said:
Today we are pleased to announce the sale of the business to Rithm. Rithm has strong mortgage industry credentials and the ability to bring capital to scale the business further. With its track record of successful M&A execution and integration, we expect a smooth transition for the business and our customers. Today's announcement represents an important milestone in executing Computershare's simplification strategy and drive to increase the quality and consistency of earnings.
Irving highlights that the sale will allow the company to focus on its core businesses and consider strategic investments or capital returns. He adds:
The divestment of US Mortgage Services allows us to focus our efforts on our core businesses which have high levels of recurring revenues, long term growth runways, low capital intensity and attractive returns through the cycle. The proceeds from the sale will enhance Computershare's flexibility to pursue strategic investments and consider further capital management opportunities. We thank the management and employees of the business for their hard work and successes along the way and wish them the very best for their next chapter.
What's next?
The transaction remains subject to customary closing conditions, including regulatory approvals, but is expected to complete in early fourth quarter of FY 2024.
Depending on the timing of the transaction closing, it is not expected to have a material impact on the ASX 200 stock's FY 2024 earnings per share guidance. Management continues to expect FY 2024 earnings per share to be around 116 cents. However, the transaction is expected to be earnings per share accretive in the first full year following divestment.
