Blackstone, TPG, CVC weigh $5-6 billion Gates buyout: sources – Reuters

Blackstone Group LP (BX.N), TPG Capital LP and CVC Capital Partners Ltd (CVC.UL) are on a short list of buyout firms competing to acquire Gates Global Inc, in a deal expected to value the industrial company at US$5 billion to US$6 billion, according to people familiar with the matter.

Gates, owned by Onex Corp (OCX.TO) and the Canada Pension Plan Investment Board (CPPIB), has chosen those private equity firms for a second round of bidding after reviewing initial offers submitted last week, the people said.

Previously known as Tomkins Plc, Gates filed for an initial public offering in December, more than three years after the manufacturer of auto parts and building products was taken private for US$5 billion in 2010.

Reuters first reported in November, citing people familiar with the matter, that Onex and CPPIB were planning a “dual track” process to explore both an outright sale of Gates to another company and a public offering.

Should a sale occur, it would be one of the largest private equity buyouts in recent years. Leveraged buyouts exceeding US$5 billion have been infrequent since the financial crisis due to the reluctance of firms to invest large amounts of capital.

In one scenario, Onex would sell its 55.9 percent interest in Gates while CPPIB would stay, along with the new owner, two of the people said.

Besides Blackstone, TPG and CVC, at least one other firm is involved in the auction, according to the people familiar with the matter, who asked not to be named because the process is private.

Representatives for Onex, Gates and TPG did not immediately respond to requests for comment. CPPIB, Blackstone and CVC declined to comment.

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, according to the filing.

Gates serves a broad range of sectors, including oil and gas, mining, construction, agriculture, transportation, automotive and manufacturing.

The company generated US$2.9 billion in sales and US$536 million in adjusted earnings before interest, taxes, depreciation and amortization in the 12 months ended September 28, according to the December filing.

Onex, CPPIB and Tomkins’ management invested US$2.2 billion as equity when they took Tomkins private for US$5 billion, including debt. In September 2012, CPPIB agreed to acquire Tomkins’ air distribution division, which makes products for air-conditioning systems, for about US$1.1 billion.

Bank of America Merrill Lynch (BAC.N), Citigroup Inc (C.N) and Goldman Sachs Group Inc (GS.N) are lead IPO underwriters in the proposed IPO. Goldman Sachs, separately, is leading the effort to sell the company outright to another party.

(Reporting by Soyoung Kim and Greg Roumeliotis in New York, additional reporting by Michael Erman)

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