The cash generated by the bias‑tire and compact‑equipment track carve‑out will be a clear “balance‑sheet catalyst” for Michelin. Assuming the transaction is priced in line with recent comparable disposals in the specialty‑tire niche (roughly €1.2‑1.4 bn for a business that generated €650 m of revenue and €90 m of EBITDA in 2024), the net proceeds after a modest transaction fee and tax impact will lift cash‑and‑cash equivalents by about €1 bn and reduce net debt by a similar amount if the board elects to retire borrowing. This would improve the company’s net‑debt‑to‑EBITDA ratio from roughly 2.2× to sub‑1.5×, a level that is well below the 2.0× covenant ceiling set in its revolving facility and would give Michelin additional headroom to fund its 2025‑2027 cap‑ex plan without resorting to higher‑cost financing. The de‑leveraging also strengthens the equity‑to‑assets mix, which can be reflected in a modest uplift to the credit rating outlook and may shrink the spread on its senior bonds, further supporting the share price.
From a dividend standpoint, the stronger balance sheet gives the board flexibility to maintain or modestly increase the current 4.5 % payout ratio. The cash inflow offsets the decline in earnings that the divested unit contributed (approximately €0.25 per share of FY‑24 EPS), meaning the net effect on earnings per share should be neutral to slightly positive once the proceeds are allocated to debt pay‑down (lower interest expense) and modest share‑repurchase funding. Investors can thus expect the quarterly dividend to stay at €0.84 per share with a possible 2‑3 % incremental raise in the next board proposal, which aligns with the company’s historic “stable dividend” policy and supports the stock’s appeal to income‑focused funds.
Trading implication: The news should reinforce a bullish bias on ML. The price has been trending above its 200‑day moving average and the 50‑day MA is now crossing upward, indicating a short‑term technical upside. With the balance‑sheet upgrade and dividend continuity, the risk‑reward profile improves for long positions, especially for dividend‑capture strategies. A target of €170–€180 (≈12‑15 % upside from the current level) is justified on a 12‑month horizon, while a tight stop around €150 protects against a broader market pullback. Short‑term traders might watch for a brief profit‑taking rally on the news, but the underlying fundamentals support sustained buying pressure.