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GM to receive $5.6 billion in sale of transmission business

June 29, 2007|From Reuters

DETROIT — General Motors Corp. said Thursday that it would sell its Allison Transmission unit for $5.6 billion to private equity firms Carlyle Group and Onex Corp., sending the automaker's shares to their highest level since January 2005.

GM shares rose as much as 3.3% as analysts speculated that the automaker could use the proceeds from the sale to fund a cost-cutting deal on healthcare in upcoming talks with the United Auto Workers union.

The negotiated price was more than some Wall Street analysts had expected GM to get for the business, which makes transmissions for commercial trucks, buses and military vehicles. GM had said in January that it was looking to sell Allison.

GM, the world's No. 2 automaker by volume, behind Toyota Motor Corp., said the sale would include almost all of Allison's assets, including manufacturing plants in Indianapolis and its worldwide distribution network.

The sale is expected to close as soon as the third quarter, GM said, provided it is approved by the UAW and regulators.

Other bidders for Allison had included Blackstone Group and Centerbridge Capital Partners, sources familiar with the matter said.

The agreement comes as Detroit-based GM heads into crucial contract talks with the UAW in which it will seek concessions to lower its labor costs.

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