The buyout firm is in the final stages of negotiations with Gates'
private equity owners, Onex Corp <OCX.TO> and the Canada Pension
Plan Investment Board (CPPIB), and the two sides are aiming to
finalize an agreement by early next week, the people said on
Blackstone is preparing to do the deal on its own after another
buyout firm, TPG Capital Management LP <TPG.UL>, with which it had
teamed up to submit a joint bid two weeks ago, decided not to back a
higher bid to meet Gates' price expectations, the people said. The
pair had bid around $5.4 billion then, one person said.
The final deal price could not be learned, but the transaction is
now expected to value the auto parts and building products maker at
between $5.5 billion and $6 billion including debt, according to the
Blackstone has yet to complete confirmatory due diligence and a deal
has yet to be signed, cautioned the people, who asked not to be
named because the matter is not public.
Representatives for Blackstone and CPPIB declined to comment, while
Onex, TPG and Gates did not immediately respond to requests for
Reuters reported last week that Blackstone was working on a higher
takeover bid for Gates after its previous offer was turned down as
too low by Onex and CPPIB.
A deal for Gates would mark the second-largest private equity deal
reached 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.
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
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
[to top of second column]
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 at TPG's request,
but TPG ultimately could not narrow the price gap with sellers.
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
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
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.
(Editing by Steve Orlofsky and Matthew Lewis)
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