Sterling Group To Buy Stackpole for $285 Mln

Tomkins, the UK manufacturing firm, is selling Stackpole International after eight years.

The Sterling Group, a Houston PE firm, is the buyer.

Tomkins acquired Stackpole in 2003 for C$331 million (now valued at US$349 million), according to reports. Toronto-based Stackpole makes automotive powertrain systems and components.

Now here’s where things get confusing. Last year, Onex Corp. and the Canada Pension Plan Investment Board bought Tompkins for US$4.5 billion. Onex and the CPP Investment Board formed Pinafore to buy Tomkins.

Pinafore announced the sale of Stackpole in a statement on the Tomkins’s web site. However, Pinafore never mentions Stackpole by name. Sterling, according to the statement, has agreed to buy “(i) certain assets from Gates Canada Inc. and The Gates Corporation, FormFlo Limited, Gates Gmbh, Gates S.A.S., and Gates Unitta Power Transmission (Shanghai) Limited and (ii) the equity interests of certain entities currently owed by Tomkins Finance Limited, Tomkins Investments Limited and Gates PowerTrain UK Limited” for $285 million.”

Tomkins owns Gates and I’m told that the assets being sold are indeed Stackpole. The sale is supposed to close in third quarter.

It looks like Tomkins is taking a loss on the deal. Sterling is paying US$285 million, which translates to C$270.3 million. This is 18% lower than the C$331 million that Tompkins paid for Stackpole eight years ago. However, if Tomkins has paid off Stackpole’s debt it could still have made a gain on the equity, one PE exec said.

Sterling invests in basic manufacturing and services. Sterling’s third institutional fund raised $820 million in 2010. The PE firm typically invests in deals with an average enterprise value of $250 million, with equity checks typically averaging around $90 million, a source says. If Stackpole closes, the deal will be Sterling’s second investment from fund III, the person says.

Tompkins couldn’t be reached for comment. Sterling officials declined comment.