Why OM Group's Shares Jumped

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What: Shares of specialty chemical company OM Group (UNKNOWN: OMG.DL  ) jumped 12% after it announced the sale of one of its businesses.

So what: The company is selling the downstream part of its advanced materials business to a joint ventures that includes Freeport-McMoRan Copper & Gold, Lundin Mining, and La Generale des Carrieres et des Mines. OM will get $325 million in cash and as much as $110 million in future payments based on the hitting revenue targets over the next three years.  

Now what: After the deal, the company expects to have $500 million in cash on hand and will use the money to pay down debt and repurchase as much as $50 million of common shares. Management also sees this as a move to move away from commodities to higher value add businesses, which are part of its growth strategy. Shares are trading at 17 times forward earnings, which isn't cheap, but considering recent growth and the strengthened balance sheet, I think shares can continue to move higher.

Interested in more info on OM Group? Add it to your watchlist by clicking here.

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