Automotive parts supplier TRW Automotive Holdings Corp TRW.N said it will buy back shares worth up to $1 billion over the next two years.
The company's shares were up 8 percent at $47 on the New York Stock Exchange on Monday morning. The stock, which touched a high of $48.49 earlier, was one of the top percentage gainers on the exchange.
The share buyback is significantly bigger than what they've done in the past and was easily seven to eight months earlier than expected, said Jefferies & Co analyst Peter Nesvold.
"News of the buyback precedes the European Commission's settlement and one interpretation of this might be that they're actually very close to resolving the antitrust review," he said.
TRW, whose big customers include BMW (BMWG.DE) and Volkswagen's (VOWG_p.DE) Audi brand, said in July 2011 that its German unit was being investigated about possible price fixing of auto parts.
"The announcement bodes well for a more favorable antitrust settlement than what is currently priced into the stock," Morgan Stanley analysts led by Ravi Shanker wrote in a client note.
The company pleaded guilty and agreed to pay a fine to settle a parallel investigation by the U.S. Justice Department.
The repurchase program, which will start in the fourth quarter of 2012, will be implemented through various methods including negotiated block transactions, accelerated share repurchase transactions or open market purchases, TRW said.
The company had said in July that it remained cautious in the near-term on the difficult economic environment in Europe and its effect on auto sales.
The share repurchase might mean that TRW is starting to see some signs of life or stabilization in the European cycle, Jefferies analyst Nesvold said.
Europe accounted for nearly half of TRW's total sales in 2011.
TRW Chief Executive John Plant declined to comment on the economic situation in Europe as well as the antitrust review on a conference call with analysts.
"We've provided ourselves with the capacity and flexibility to do pretty much what we want," he said.
TRW, valued at more than $5 billion as of Friday closing, had cash on hand of $1.24 billion at the end of 2011. The company had net debt of $506 million as of June 29.
"The company has a very solid balance sheet and very good cash flow generating ability," said Guggenheim Securities's Matthew Stover.
(Editing by Sreejiraj Eluvangal and Sriraj Kalluvila)