Allison Transmission Holdings Inc. shares rose in their trading debut Thursday (March 15) after the Indianapolis-based manufacturer raised more than sought in its initial public offering (IPO).
After falling in early trading, shares rose 1.7%, to close at $23.40 each, giving Allison a market value of about $4.2 billion. The Indianapolis-based company manufactures transmissions for a variety of heavy-duty vehicles, including motorhomes.
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.
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% 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.”