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 Blackstone, which submitted its binding offer in partnership with
TPG Capital LP on Wednesday, is in negotiations with Gates' owners — Onex Corp <OCX.TO> and the Canada Pension Plan Investment Board (CPPIB)-
about raising its bid to clinch a deal for the auto parts and
building products maker, the people said.
It remains unclear whether TPG will agree to join Blackstone in the
deal at a higher valuation, one of the people said, cautioning that
the negotiations were ongoing.
While Onex and CPPIB are also weighing an initial public offering of
Gates in a so-called "dual track" process, they are leaning toward a
sale and are working to finalize a purchase agreement, the people
said.
If final terms are agreed, a deal for Gates could come in the next
two weeks, the people said. It would mark the second largest private
equity deal agreed so far this year following Cerberus Capital
Management LP's $9.4 billion merger of its Albertsons supermarket
chain with Safeway Inc <SWY.N>, which was announced earlier this
month.
All the people asked not to be identified because the matter is
confidential. Representatives for Blackstone, TPG and CPPIB declined
to comment, while Onex and Gates did not immediately respond to
requests for comment.
Previously known as Tomkins Plc, Gates filed for an IPO in December,
more than three years after it was taken private for $5 billion in
2010.
Reuters first reported in November, citing people familiar with the
matter, that Onex and CPPIB were seeking to hire banks to explore
both an outright sale of Gates to another company and a public
offering.
Blackstone and TPG were among a few buyout firms that were
shortlisted to bid for Gates, Reuters reported in January. The two
buyout firms later teamed up to pursue a joint bid.
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Denver-based Gates has manufacturing operations in 29 countries. It
sells products ranging from power transmission systems to acrylic
bathtubs in more than 120 countries.
Gates serves a broad range of sectors, including oil and gas,
mining, construction, agriculture, transportation, automotive and
manufacturing.
The company generated $2.9 billion in sales and $536 million in
adjusted earnings before interest, taxes, depreciation and
amortization in the 12 months ended September 28, according to a
regulatory filing.
Onex, CPPIB and Tomkins' management invested $2.2 billion as equity
when they took Tomkins private for $5 billion, including debt. In
September 2012, CPPIB agreed to acquire Tomkins' air distribution
division, which makes products for air-conditioning systems, for
about $1.1 billion.
(Reporting by Soyoung Kim and Greg Roumeliotis in New York;
editing
by Cynthia Osterman)
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