NEW YORK/DETROIT Allison Transmission, which makes automatic transmissions for fire trucks, school buses and military vehicles, has hired banks for a third quarter initial public offering that could raise around $1 billion, four sources familiar with the situation said.
An IPO by Allison is another sign of an improved landscape for auto and auto supplier offerings, led by the General Motors Co (GM.N) IPO three months ago.
The flotation by the Indianapolis-based company taken private by Carlyle and Onex before the financial crisis would also be the latest in a series of big sales by private equity firms seeking to take advantage of a recent IPO boomlet.
Among the auto industry IPOs that could come this year are Chrysler Group LLC and suppliers International Automotive Components Group (IAC) and Delphi. Chrysler emerged from bankruptcy under management control of Italy's Fiat SpA FIA.MI in June 2009.
The U.S. auto industry was driven to the brink of collapse during the financial crisis, but is rebounding after the bankruptcies of General Motors Co (GM.N) and Chrysler. In 2009, U.S. auto sales fell to 10.4 million vehicles, the lowest since the recession in the early 1980s and well-below the 17 million vehicle per-year average in the decade before the crisis.
U.S. auto sales are projected to rise to 13 million vehicles in 2011, according to research firm J.D. Power and Associates.
Auto suppliers such as Allison are also faring better. Federal-Mogul Corp (FDML.O) and Dana Holding Corp (DAN.N) reported improved fourth-quarter results on Wednesday and forecast strong gains for the next four years.
Still, there are some headwinds, led by concerns about high oil and commodities prices. Crude oil futures rose to over $100 in U.S. trading this week and nearly $120 in London trading.
GM posted fourth-quarter results that topped Wall Street expectations, but its shares slid as investors focused on rising oil prices and higher costs to launch and sell new cars.
$1 BILLION RECOVERY BET
Allison's proposed offering, likely around $1 billion, is big for a United States IPO. Excluding GM's massive $23.1 billion offering, the average size of a U.S. IPO in 2010 was only $150 million, according to data from Connecticut-based IPO research and investment firm Renaissance Capital.
Two of the sources said the Allison IPO is expected to raise between $500 million and $1 billion. A third source said the IPO would be between $750 million and $1 billion and the fourth said the IPO would be at least $1 billion.
Because the IPO is several months away and bankers have not begun taking orders from investors, it is unclear exactly how big it will be.
Bank of America Merrill Lynch (BAC.N), Citigroup Inc (C.N), Credit Suisse Group AG CSGN.VX, Morgan Stanley (MS.N) and JPMorgan Chase & Co (JPM.N) have been hired as underwriters on the Allison IPO, the sources said.
The information is not public and the sources declined to be named.
Bank of America, Citi, Credit Suisse, Morgan Stanley and JPMorgan declined to comment. Allison Transmission, Carlyle and Onex were not available for comment.
Allison, which employs 2,700 people, is based in Indianapolis and has regional headquarters in China, the Netherlands, Brazil, India and Japan. It was formerly owned by GM.
GM tried in 1993 to sell Allison to German supplier ZF Friedrichshafen AG ZFF.UL for $525 million, but the deal fell apart when U.S. antitrust regulators sued to block the sale.
GM successfully sold the transmission maker to Carlyle Group CYL.UL and Onex Corp (OCX.TO) for $5.6 billion in 2007. Carlyle and Onex split the roughly $1.5 billion equity portion of the deal.
(Reporting by Clare Baldwin in New York and Bernie Woodall in Detroit; editing by Andre Grenon)