TRW to spend $1 billion on share buybacks
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DETROIT (Reuters) -- Automotive safety systems supplier TRW Automotive Holdings Corp. said today it would spend up to $1 billion to buy back its shares.
The repurchase program will start in the fourth quarter of this year and is expected to be executed over two years, the company said in a statement.
TRW was valued at $5.33 billion as of Friday closing.
TRW shares rose 7.7 percent to $47.08 in today's trading.
The company's shares, which before today gained about 50 percent since last December, closed at $43.71 on the New York Stock Exchange on Friday.
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.
Antitrust review
"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 and Volkswagen's 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.
Signs of life
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 CEO 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.
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