The Brambles Limited (ASX: BXB) share price surged higher today on news that it sold its IFCO reusable plastic container business for US$2.51 billion ($3.51 billion) and will hand back most of the cash to shareholders.
The BXB share price jumped 2.3% to a two-year high of $11.86 in late afternoon trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index dipped 0.1% into the red.
Management sold the business to Triton and Luxinva – a subsidiary of the Abu Dhabi sovereign wealth fund and has committed to returning US$1.95 billion to shareholders through a cash handout and share buyback.
Big cash giveaway
The cash handout is similar to a dividend for all intent and purposes but requires a favourable ruling from the Australian Taxation Office (as it's technically a capital return).
This cash return will work out to about $0.29 per share – the same amount of dividends Brambles paid in FY18. Talk about getting a double-dip in the dividend pool!
The rest of the proceeds (approximately US$1.65 billion) will be used to fund an on-market share buyback, with the balance used to repay debt.
It looks like Brambles got a good price for IFCO, which it purchased nine years ago for US$1.3 billion.
This business generated revenue of US$1.1 billion and an underlying profit of US$133 million in the last financial year.
Foolish takeaway
Today's news only reaffirms my bullish take on Brambles as I believe the logistics group is well on the path to delivering higher profits over the short to medium term as some of the headwinds that have impacted the business are easing. This includes rising costs and operational problems with its pallet division.
Meanwhile, demand for its services seem to be improving in the US. Throw in the prospect of a weak Australian dollar and you can see why the outlook for Brambles is promising.
But Brambles isn't the only US exposed stock to keep an eye on for 2019. I also like gaming machine maker Aristocrat Leisure Limited (ASX: ALL) and steel products manufacturer BlueScope Steel Limited (ASX: BSL).
The Brambles share price has jumped 23% over the past year while the ASX 200 is up 2%.
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