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Investing.com -- Shares of OC Oerlikon Corp AG (SWX:OERL) soared by 21% following the announcement of the divestment of its manmade fiber business Barmag to Rieter for CHF 850 million in enterprise value, potentially reaching up to CHF 950 million including earn-outs. The transaction is expected to close between the fourth quarter of 2025 and the first quarter of 2026.
The company’s first-quarter orders and sales came in slightly above consensus, with orders reaching CHF 605 million and sales at CHF 572 million, marking a 3% and 1% beat, respectively. Despite a year-on-year decline in organic growth for the Surface Solutions Segment (OSS), March showed improvement after a softer January.
Barmag posted a 5% order and sales beat, although its results are now considered non-relevant given the pending sale.
OC Oerlikon has also updated its 2025 outlook, excluding Barmag from its guidance. The revenue growth target remains unchanged, aiming for flat to low single-digit growth excluding foreign exchange impacts.
However, the EBITDA margin target has been adjusted to "around 18.5%" from the previous range of "18.5-19.0%". This revision includes the allocation of corporate costs that were previously absorbed by Barmag. The consensus broadly aligns with the guidance, expecting a 2% organic revenue growth for OSS and an 18.7% EBITDA margin.
The divestment of Barmag, which has historically accounted for 25-40% of OC Oerlikon’s group revenues, is seen as a strategic move as the company emerges from a three-year downcycle.
Analysts at RBC commented, "The divestment of Barmag was already expected and planned, but happened a bit faster than we anticipated. Barmag has accounted for some 25-40% of Oerlikon’s group revenues, depending on the stage in its (heavy) business cycle. The business only now emerges from a 3-year downcycle with us expecting orders in 2025 below 50% of the peak-2022 level, followed by a slow recovery. Valuation thoughts: The price is fair."
The expected cash proceeds from the sale are CHF 713 million, with the remainder being pension liabilities. The company plans to use the proceeds to repay a CHF 450 million term loan and potentially distribute a special dividend. Post-deal, the gearing level is anticipated to be around 1.25x Net debt/EBITDA.
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