DSM-Firmenich stock rises on divestment news

Investing.com -- Shares of DSM-Firmenich climbed 4% today following the company's announcement of divesting its stake in the Feed Enzyme alliance with Novonesis for approximately €1.5 billion.

The net proceeds from the sale, after taxes and costs, are estimated at €1.4 billion, translating to an implied 20x EV/EBITDA.

The sale is a strategic move as DSM-Firmenich shifts its focus toward divesting its Animal Nutrition business by 2025, with the process of exploring transaction options set to begin next week.

The divestment is expected to cause a slight (LSD) EPS dilution, according to the company's press release. However, investors seem to be responding positively to the news, as it indicates a clear strategy for DSM-Firmenich to streamline its operations and strengthen its balance sheet.

The company's upcoming results, due to be reported this Thursday, will likely provide further insights into the financial implications of the divestment and the company's future capital allocation plans.

Jefferies, a financial services company, commented on the divestment, stating: "The combination of this divestment and the previously announced Robertet sale represents ~€1.8 billion of net proceeds from divestments, implying proforma leverage is sub 1x (post pensions).

This suggests DSM-Firmenich could communicate on capital returns even before the finalised remaining ANH sale. We expect share price support."

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