Codan (ASX:CDA) share price edges lower following divestment news

The company’s sell-off announcement is not proving overly popular with investors.
The post Codan (ASX:CDA) share price edges lower following divestment news appeared first on The Motley Fool Australia. –

Codan Limited (ASX: CDA) shares are inching lower during afternoon trade on Wednesday. At the time of writing, the Codan share price is trading 1.35% lower at $18.27.

This comes following news the technology company is selling one one of its businesses.

What did Codan announce?

Investors are pushing the Codan share price lower after the company updated the ASX with its latest release.

In its announcement, Codan advised it has entered into an agreement to sell its wholly-owned subsidiary, Minetec, to Caterpillar Holdings Australia.

Minetec was established in 2000 and “provides unique high-precision tracking, productivity and safety solutions for underground hard-rock mines”. The company uses its patented TRAX technology to allow real-time monitoring and control of mining operations. In essence, this gives miners a snapshot of the whole mine, identifying areas that can be improved in productivity and safety performance.

The deal will see 100% of Minetec shares transferred to Caterpillar for US$14 million and a volume-based earnout over the next five years. The latter relates to Codan providing manufacturing services to Caterpillar, ensuring a smooth handover.

The sale is subject to the usual customary conditions and is expected to be completed in July this year.

Why did Codan sell Minetec?

In February 2018, Minetec partnered with Caterpillar, signing a master development and marketing agreement. The two parties worked on integrating Minetec’s technology into Caterpillar’s systems and saw a value-added benefit.

Codan stated that Minetec has not grown to repay back the ongoing investment made on the technology business. As a result, the board undertook a strategic review of the company and decided to offload it to Caterpillar.

Codan managing director Donald McGurk commented:

As we evaluated our strategic options, we concluded that the best outcome for Minetec to achieve its potential was to discuss the transfer of the business to Caterpillar, this being seen as a logical progression following the partnership agreement put in place in 2018.

We believe that Caterpillar is the more appropriate owner, as they continue to be the market leading supplier to the mining industry, with an extensive global dealer network covering 172 dealers across 190 countries.

Codan will use the funds received from the sale to pay down its existing debt facilities. In addition, the company will focus its efforts on the recently acquired businesses of Domo Tactical Communications, and Zetron.

About the Codan share price

It’s been a positive 12 months for Codan investors, with the company’s share price rising more than 150%. Year-to-date performance has also tracked impressively, with the Codan share price up by around 63%.

Codan shares reached a 52-week high of $19.43 on Monday this week.

The company has a market capitalisation of roughly $3.3 billion, with approximately 180 million shares outstanding.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

ASX 200 up 0.65%: BHP & Rio higher, energy shares jump

3 ASX shares hitting 52-week highs this week

Codan (ASX:CDA) share price tops performance on ASX Tech Index in 2021
Codan (ASX:CDA) share price wobbles on news of a completed acquisition

The post Codan (ASX:CDA) share price edges lower following divestment news appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!