Onex, CPPIB To Sell Gates To Blackstone For US$5.4 Bln

(RTTNews) - Canadian private equity firm Onex Corp. (OCX.TO) and Canada Pension Plan Investment Board said Friday that they have agreed to sell industrial and automotive parts maker Gates Corp. to U.S. private equity firm Blackstone Group L.P. (BX) for US$5.4 billion.

The deal, which marks the second largest private equity buyout so far this year after the agreed US$9 billion deal between Cerberus Capital Management LP and grocery chain Safeway, Inc. (SWY), is expected to close later this year.

Denver, Colorado, USA-based Gates, which employs more than 14,500 people, manufactures power transmission belts and fluid power products that are used in diverse industrial and automotive applications.

Gates is a division of U.K.-based Tomkins, which Onex and Canada Pension Plan Investment Board jointly acquired in 2010 for about US$5.0 billion. Including the sale of Gates, Onex and Canada Pension Plan Investment Board will have divested eight divisions of Tomkins, for total proceeds of US$7.9 billion.

Onex's portion of the proceeds from the sale of Gates alone will be about US$550 million, while Canada Pension Plan Investment Board's portion of the proceeds will be about US$1.5 billion.

The deal puts to an end months of speculations over the fate of Gates.

Gates had filed for an IPO with the U.S. Securities and Exchange Commission in December after its owners had put it on the block a year ago. The process of exploring a sale and an IPO together is normally adopted by private equity firms to extract the best possible offer from a potential bidder and valuation for the IPO.

The leveraged buyout is Blackstone's biggest since 2007, when it bought Hilton Worldwide Holdings for $26 billion.

Onex shares closed Friday on the TSX at C$61.25, up C$0.01. Blackstone shares closed Friday's regular trading session at US$32.80, down 76 cents or 2.26%.