Avon Rubber PLC (LON:AVON) expects to milk £160mln of cash after agreeing the sale of its dairy farming equipment business, which it plans to use for acquisitions.
The FTSE 250 group said it will sell Milkrite InterPuls to DeLaval Holding for a total of £180mln, with completion expected before the end of December.
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Milkrite InterPuls, which provides “complete milking point solutions” to dairy farmers, has been a growing and profitable business, but group chief executive Paul McDonald said the sale “represents an important step in the strategic development of Avon Rubber”.
“Having achieved our valuation expectations, the board believes the time is right to allow this business to grow and flourish under new ownership.”
For the previous financial year, the subsidiary generated revenue of £50.9mln and statutory operating profit of £3.8mln.
Avon Rubber said it has agreed with the trustees of its UK pension scheme to skim off £20mln of the proceeds to make a contribution to the scheme, following completion of the deal.
“The remaining proceeds will be used to strengthen the group's balance sheet as it continues to target value enhancing acquisitions to support the growth of its Avon Protection business,” the company said.
The shares were up 3% in early trading on Thursday to 3,391.43p, and are more than 63% higher since the start of the year.