The primary investors in Allison Transmission Holdings Inc. are looking to lock in profits by unloading 16.6 million shares in the company.
Allison’s share price drooped on Tuesday morning, following the announcement of the stock offering Monday. Shares fell $1.36, or about 5.7 percent, to $22.47 in mid-morning trading. At the current price, the share sale would raise $373 million.
Carlyle Group LP and Onex Corp.hold the lion’s share of the 186 million outstanding shares of Indianapolis-based Allison. They bought their stock for an average of $8.44 per share in 2007, according to regulatory filings. The per-share price in the IPO five years later was $23.
At the current price, the owners would reap a profit of about $233 million. After completing the sell-off, they'd still own 134 million shares, or 74 percent of the company.
Such secondary offerings tend to depress stock prices by putting more shares in play. But Allison plans to use cash on hand to repurchase $100 million of the shares from the offering, which could somewhat blunt the impact on the stock price.
A group led by BofA Merrill Lynch, Citigroup and J.P. Morgan will act as the underwriters in the offering. If demand for the shares is high, underwriters will have an option to sell nearly 2.5 million additional shares held by Carlyle and Onex.
Allison is the world's largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles, medium- and heavy-tactical U.S. defense vehicles and hybrid-propulsion systems for transit buses.
Profit and revenue tumbled for Allison Transmission Holdings Inc. in the second quarter of this fiscal year, as demand in its mining and military markets slipped.
The company reported second-quarter profit in late July of $50.5 million, compared with $412.8 million in the same quarter of 2012. Last year’s profit for the quarter was boosted by a one-time, $350 million income-tax benefit.
More troublesome was Allison’s dip in revenue—$512.1 million for the most recent quarter, down 8 percent from $559.4 million in the second quarter of 2012.