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Warren Buffett Buys IMI plc Divisions For £690m

The shares of IMI (LSE: IMI) jumped 33p to 1,532p during early trade this morning after the engineer said it would sell its drink-dispensing and retail-merchandising divisions to the investing vehicle of Warren Buffett.

The FTSE 100 member confirmed Berkshire Hathaway would pay £690m in cash for the operations.

IMI added £620m would then be returned to shareholders, while the remaining £70m would be injected into the group’s pension fund.

Martin Lamb, IMI’s chief executive, said:

The disposal of Retail Dispense is a major step for IMI. It positions IMI as a highly differentiated, market-leading flow-control business focused entirely on industrial end markets.” 

With these end markets set to benefit further from favourable structural trends such as climate change and urbanisation, and cumulative investments in R&D gaining traction, the prospects for accelerated long-term growth are encouraging.

IMI also confirmed today that it expected to deliver full-year results in line with current market expectations.

Those expectations are for earnings to advance 3% to 86.6p per share and for the dividend to climb 9% to 35.3p per share.

Following this morning’s price reaction, IMI’s shares trade at a possible P/E of 17.7 and yield a potential 2.3%.

Of course, whether that valuation, the sale to Warren Buffett and the general prospects for flow-control systems all currently combine to make IMI a 'buy' right now is something only you can decide.

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> Maynard does not own any share mentioned in this article.