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Allison shares rise in first day after expanded IPO

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Allison Transmission Holdings Inc. shares rose in their trading debut Thursday after the Indianapolis-based manufacturer raised more than sought in its initial public offering.

After falling in early trading, shares rose 1.7 percent, to close at $23.40 each, giving Allison a market value of about $4.2 billion.

The company on Wednesday raised $600 million in the IPO, selling 26.1 million shares for $23 each after offering 21.7 million shares at $22 to $24.

The IPO price valued Allison’s stock at $4.2 billion, or almost triple the equity value when Carlyle Group LP and Onex Corp. bought the business from the predecessor of General Motors Co. in 2007. It also makes Allison twice as expensive as Delphi Automotive Plc and Remy International Inc., two other former units of the automaker, according to data compiled by Bloomberg.

Including net debt, Allison’s IPO price valued the company at $7.2 billion, or about 11 times last year’s earnings before interest, taxes, depreciation and amortization. Delphi, the car-parts maker that went public last year, had an enterprise value- to-EBITDA multiple of about 5.5 as of March 13, data compiled by Bloomberg show. Remy, the former GM unit that exited bankruptcy in 2007, had an enterprise value of about 5.4 times EBITDA, the data indicate.

The shares are trading on the New York Stock Exchange under the symbol ALSN. The company has benefited from a surge in truck sales, reporting net income of $103 million last year after returning to profit in 2010. Allison got 34 percent of its 2011 revenue, or $727 million, from parts for on-highway vehicles in North America, Allison’s IPO filing showed.

So far, Allison’s market share among interstate hauling trucks has remained small because manual transmissions get better mileage. Frequent starts and stops of city driving make automatic transmissions popular for garbage and delivery trucks and other work vehicles.

Allison sees growth potential for short haul tractor-trailers used on highways and in cities, CEO Lawrence Dewey said in an interview. A new transmission is being tested with more than 55 fleets, including Wal-Mart Stores Inc., FedEx Corp., and United Parcel Service Inc., he said.

The transmission should be available next year, he said. Allison also has had interest from fleet operators in Europe and Asia, where penetration of automatic transmissions is lower than in North America.

“We think the value proposition will be very attractive,” Dewey said. “Certainly that’s been the feedback.”

Carlyle and Onex bought Allison at the tail end of a private-equity buying spree from 2005 to 2007, when about $1.6 trillion in leveraged buyouts were completed, according to Preqin Ltd., a London-based research firm. The two private-equity firms received all of the proceeds from the offering.

GM sold Allison, which it acquired in 1929, to raise cash. The automaker reorganized under a U.S.-backed bankruptcy in 2009.

Allison traces its roots to Jim Allison, who was a co-founder of Indianapolis Motor Speedway, home of the Indianapolis 500 auto race, a track built to test race car parts. GM bought the company in 1929 after Allison’s death.
 

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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