Torotrak Plc (TRK), a U.K. maker of vehicle transmission systems, rose as much as 21 percent after Allison Transmission Holdings Inc., a former General Motors Co. unit, agreed to renew a license and increase its stake.
The agreement and share sale provides the Leyland, England- based company with about 8.5 million pounds ($12.9 million), Torotrak said today in a statement. Allison was bought by Carlyle Group LP (CG) and Onex Corp. from General Motors in 2007. Torotrak also said it will pay 3 million pounds for a 20 percent stake in Flybrid Automotive Ltd., a maker of transmissions with fuel-economy benefits for cars and trucks.
“This is excellent news,” said Richard Hickinbotham, an analyst at Charles Stanley Securities Ltd. in London. “The Flybrid deal is really securing their route to market, and the systems they have are a third of the price of electric hybrid. They give the best reduction in CO2 at the cheapest price.” He reiterated his buy recommendation on the stock. Charles Stanley acts as broker to the company.
Torotrak rose as much as 5 pence to 29 pence, the biggest intraday percentage increase since March 2011. Volume was more than nine times the three month daily average, according to data compiled by Bloomberg. The stock traded at 28.25 pence at 11:54 a.m. in London, giving the company a market value of 47 million pounds.
The two analysts who made recommendations on Torotrak in the last 13 months and shared their reports with Bloomberg recommend buying the shares. Their average price estimate implies that the stock will double.
Torotrak’s transmission systems use discs and rollers to transfer power from the engine to the wheel, while conventional systems use gears. Tata Motors Ltd. (TTMT), the Indian owner of Jaguar Land Rover, is among automakers that use Torotrak technology. The company expects increasing demand for its fuel-saving technology because of more demanding environmental regulations around the world and higher fuel prices.
Flybrid’s main product is a high-speed flywheel based energy recovery system which saves on fuel. Flybrid’s first so- called Kinetic Energy Recovery System was designed for the 2009 Formula One season.
“The strategy we set out to achieve in November of a more diversified company with greater control of its routes to market, has taken a good step forward today,” Chief Executive Officer Jeremy Deering said in a statement.
Allison will acquire 8.3 million new Torotrak shares for 30.255 pence each, representing a 20 percent premium to the average mid-market closing price of the stock for the past 10 days before today’s announcement.
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