The initial public offering filing by Onex Corp. holding Allison Transmission puts Onex on track to almost triple its money in less than five years.
Allison is planning to sell about $500-million (U.S.) U.S. of stock in an offering that would value the company's equity at about $4.2-billion, based on the midpoint of the preliminary offering. Onex and Carlyle Group teamed up in 2007 to buy the company, putting in $1.5-billion of equity as part of a $5.6-billion purchase price.
Onex and Carlyle will cut their stakes in Allison to 44 per cent apiece after the sale.
Onex and Carlyle bought the company from General Motors Corp. The thesis was that Allison's automatic transmissions, in everything from buses to tanks, would be in growing demand as countries around the world upgraded their transportation systems.
Under and Carlyle, earnings before interest, taxes, depreciation and amortization have climbed in recent years, while the debt owed by Allison has declined. That's created the value for Onex and Carlyle.
It's a welcome addition to the win column for Onex, which is currently facing a potentially big loss on another investment it made in 2007 -- the purchase of aircraft maker Hawker Beechcraft.
Onex and Goldman Sachs Group Inc. each put $500-million into the Hawker purchase, and at the moment, markets and analysts signal that that equity investment is worth nothing.
The near-triple on Allison more than offsets the likely loss on Hawker.