Why Shares of This Manufacturer Shot Up 70% on Friday

Tower International

The biggest winner on Friday was a manufacturing company whose shares surged almost 70 percent throughout the day. Manufacturing stocks typically don’t have these massive stock price spikes, nor was this company a small, micro-cap stock.

Worth around $650 million, Tower International (NYSE: TOWR) had its best single day in over seven months as shares skyrocketed close to their 52-week highs earlier in 2018.

The news that kickstarted this surge was the announcement of a takeover offer from Autokiniton Global Group, which offered a massive $31 per share in cash for the company. In comparison to Thursday’s trading price, this was a 70 percent premium for the manufacturer, and hence why shares skyrocketed in value.

Autokiniton Global is a supplier of metal components and complex assemblies for the auto industry and is owned by KPS Capital Partners, a private equity firm with over $5 billion in actively managed assets.

“We are extremely pleased to reach agreement with AGG on a mutually beneficial transaction that creates substantial value for Tower stockholders, customers and colleagues. Tower stockholders benefit from an immediate share price premium,” said Tower President and CEO Jim Gouin.   “Tower customers will benefit from the expanded product offering and manufacturing footprint of Tower and AGG.  Finally, Tower colleagues will benefit by becoming a part of a combined entity which will be a more competitive North American supplier with a complementary manufacturing footprint and lightweighting technologies that uniquely position it for continued profitable growth.”

This offer comes at a good time for both companies, as for the past two quarters in a row, the company has reported falling revenues and negative earnings. However, the company has promised that the next quarter would see things turn around. If true, Autokiniton would end up reaping the benefits of this promised turnaround in Tower, which otherwise has been falling for the past while.

This is also nothing less than a miracle for shareholders, as the generous premium offered by Autokiniton would erase most of the losses they’ve seen over the past year. Currently, management is planning for the deal to conclude sometime in September or October but does technically has 35 days to “go shop” for another offer, although that’s extremely unlikely at this point.

Shares of Tower surged by 69.6 percent on Friday in response to the news. However, the company’s stock has been steadily declining over the past year, falling from $35 down to $17.5, all the while punctuated with sudden surges and prices drops.

With the company’s stock reaching $30.81, just under the $31 offered by Autokiniton, many shareholders will be selling at the current price to lock in their profits rather than wait two to three months to get that extra $0.19. As such, it wouldn’t be surprising if a fair portion of Friday’s gains disappears Monday morning.

Tower International Company Profile

Tower International Inc is a manufacturer of structural metal components and assemblies used in the automotive industry. The company offers body-structure stampings, frame and other chassis structures, complex welded assemblies, and suspension components for small and large cars, crossovers, pickups, and sport utility vehicles. Tower International supplies its products directly to original equipment manufacturers. – Warrior Trading News