Telit Communications PLC (LON:TCM) shares rose on Wednesday as the firm completed the sale of Telit Automotive Solutions NV to TUS for a total consideration of US$105mln allowing it to clear its bank debt.
The AIM-listed global enabler of the Internet of Things (IoT) said it has received US$67.5mln in cash, including US$1mln on account of the cash and working capital position of the disposed business, and has granted TUS a short-term vendor loan of US$38.5mln.
It pointed out that TUS has acquired Telit Belgium and its wholly-owned subsidiaries in France, Germany, Korea and Israel, a business which represents less than 20% of Telit's revenue. The assets and approximately 120 employees, who support the automotive business across global R&D and sales offices, will transfer with the sale.
Telit said TUS proposes to repay the vendor loan in full upon completion of certain bank financing that is currently in the final stages of being negotiated, and is obliged to repay it within six weeks of the completion date.
The company said the cash proceeds have been used to repay in full the group's bank debt and strengthen its cash position.
Paolo Dal Pino, executive chairman of Telit, commented: "This transaction is an important milestone in executing our strategy and it frees up considerable internal resources and provides significant cash inflow. The temporary Vendor Loan arrangement has enabled us to immediately complete this transaction.”
He added: "We now have the financial flexibility and the resources to accelerate the integration of our hardware products and IoT services and can focus on enhancing value for our customers and shareholders."
In early afternoon trading, Telit shares were 8.2% higher at 129.10p.