Blackstone, TPG, CVC weigh $5-6bln Gates buyout

Gates, owned by Onex Corp 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 $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 $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 $2.9 billion in sales and $536 million in adjusted EBITDA in the 12 months ended Sept. 28, according to the December 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.

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

Soyoung Kim and Greg Roumeliotis are reporters for Reuters News in New York