GM completes sale of Allison for $5.6B

[Flybrian]

GM completes sale of Allison for $5.6B

The Associated Press | Link to Original Article @ DetNews

DETROIT -- General Motors Corp. said today it has completed the sale of its Allison Transmission commercial and military business to The Carlyle Group and Onex Corp. for $5.6 billion.

The sale, announced in June, includes seven manufacturing plants in Indianapolis and its global distribution network and sales offices. A production facility in Baltimore, which produces conventional and hybrid transmissions for pickup trucks and sport utility vehicles, will remain with GM.

Detroit-based GM said in a statement that it would use the money to strengthen its liquidity and support investments in new products and technology.

Indianapolis-based Allison designs and builds commercial-duty automatic transmissions, hybrid propulsion systems and parts for trucks and buses, off-highway equipment and military vehicles. The company boasts an 80 percent market share of all medium- and heavy-duty commercial transmissions, with annual revenue of more than $2 billion.

The Carlyle Group is a Washington, D.C.-based private equity firm. Onex Corp. is a Toronto-based investment conglomerate. The two will be equal partners in the deal.

[I hope GMRULES again]

5.6 billion is a nice chunk of change. Hopefully a good portion of it can go to product development.

[Oracle of Delphi]

Wow 5.6 billion for a company that makes 2 billion a year. Talk about selling off the crown jewels.

[pow]

So any new hybrid buses can't be considered GM anymore?

[SuperC]

So any new hybrid buses can't be considered GM anymore?

From the Article -- A production facility in Baltimore, which produces conventional and hybrid transmissions for pickup trucks and sport utility vehicles, will remain with GM.

[Nick]

I suppose as long as it stays with GM then that's ok...They are a big selling point of the HD truck line.

[ellives]

Wow 5.6 billion for a company that makes 2 billion a year. Talk about selling off the crown jewels.

Not exactly. The article says $2B in "revenue" which is what they sell. This is not a profit number. The price is probably really good considering the profit is probably more like $400M (estimating it at somewhere like 20%.)

[Oracle of Delphi]

Not exactly. The article says $2B in "revenue" which is what they sell. This is not a profit number. The price is probably really good considering the profit is probably more like $400M (estimating it at somewhere like 20%.)

I think you need to look up the definition of "revenue", last time I went to school it meant the amount of money brought in.

[VenSeattle]

Here's a better way of looking at it... At the end of 2005, GM's price Cap was under $11-Billion. Fast-Forward to mid-2007, GM's Price Cap is near $20-Billion and has closed a $5.6-Billion sale of Allison Transmission.

I say that's a great improvement over the "GM Death Watch Cries" from the media and journalists.

[CaddyXLR-V]

I think you need to look up the definition of "revenue", last time I went to school it meant the amount of money brought in.

Revenue is simply total sales, which doesn't give any clue to the value, or health of a company. A company with $100B in revenue, can still be losing $10B per year, which in most cases makes the company worthless.

[ellives]

I think you need to look up the definition of "revenue", last time I went to school it meant the amount of money brought in.

Apparently the last time you went to school was when they were using the abacus.

"Revenue" is simply referring to "sales" as in "They sold $16B worth of product." It has nothing to do with whether the company made or lost money during these transactions. Those numbers are referred to as "profit" (or "loss") which is the actual result of being in business.... you either make or lose money on an investment.

Typically, when companies are acquired, the price paid is some multiple of their most recent "profit" number. Since the article didn't state anything about profit, which is probably by design since the profit is probably buried in GM's overall financials somewhere, we're left to speculate.

I have to disagree with XLR-V also... just because a company loses $10B on $100B definitely does not in most cases make a company worthless. It just means they lost $10B. What makes a company worthless is when their liabilities exceed their assets. This is why Ford mortgaging all their plants and equipment is so scary because they're basically betting the farm on the turnaround. Once (if) the borrowed money is gone, they'll certainly be in this situation and be forced into bankrupcy.

[ZL-1]

Typically, when companies are acquired, the price paid is some multiple of their most recent "profit" number.

Price/EBITDA multiples are much more fun!

There is something called a Price/Sales multiple too: click here

Edited August 9, 2007 by ZL-1

[PurdueGuy]

Just to make sure the argument dies, I looked up "revenue" on wikipedia & copied the first part of the definition:

Revenue is a business term for the amount of money that a company receives from its activities in a given period, mostly from sales of products and/or services to customers. It is not to be confused with the terms "profits" or "net income" which generally mean total revenue minus total expenses in a given period.

[Flybrian]

GM may receive $5.4B from sale of Allison unit
Funds will be used for costs of plant closings, employee buyouts and vehicle development

Jeff Green | Bloomberg News | Link to Original Article @ DetNews

General Motors Corp., raising cash for new models, said it expects a gain of as much as $5.4 billion this quarter from the sale of Allison Transmission to buyout firms Carlyle Group and Onex Corp.

The sale, completed last week for $5.6 billion, may increase earnings by a range of $5.1 billion to $5.4 billion, the Detroit- based automaker said in a U.S. regulatory filing Monday.

Allison, based in Indianapolis, makes transmissions for trucks, buses and military equipment, and has 3,400 employees.

With the Allison transaction, GM will have generated as much as $21.4 billion from asset sales since 2005, as Chief Executive Officer Rick Wagoner pays for buyouts of union workers, plant closings and development of new models. The automaker had annual losses of $12.4 billion the past two years and has said it doesn't expect to produce money from operations this year.

Proceeds from Allison will help GM invest in new products and technology, the automaker reiterated Monday.

GM said last month that it had $27.2 billion in cash, marketable securities and funds available from a retiree health-care fund as of June 30, an increase from $24.7 billion in March.

The automaker's shares rose 61 cents to $34.46 Monday in New York Stock Exchange composite trading. They have gained 12 percent this year. Onex shares increased 6 cents to $33.04 on the Toronto Stock Exchange.

Onex, Canada's largest buyout firm, has purchased 57 companies for about $9.42 billion since its inception in 1983. Carlyle has about $59 billion under management. The closely held firm is based in Washington.

[Sixty8panther]

Wow 5.6 billion for a company that makes 2 billion a year. Talk about selling off the crown jewels.

Agreed.... WTF????

[ellives]

Agreed.... WTF????

Read the rest of the thread.....