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Belt-maker Gates changes hands for $5.4bn

07 April, 2014

The Gates Corporation, whose products include industrial belts and fluid power products, has been bought by the private equity group Blackstone for $5.4bn. Gates’ previous owners were the Canadian private equity firm Onex and the Canada Pension Plan Investment Board, which acquired it as part of the Tomkins conglomerate, for which they paid $5bn in 2010.

“It was a tough decision to sell Gates,” says Onex’s senior managing director, Seth Mersky. “We don’t see many industrial businesses with its global brand recognition. Nonetheless, Onex shareholders and our limited partners have done very well. We have thoroughly enjoyed partnering with the Tomkins management team and wish them continued success.”

Tomkins was a UK-listed industrial holding company that operated industrial, automotive and construction businesses around the globe. Including the sale of Gates, Onex and CPPIB have sold eight of Tomkins’ divisions, for a total of $7.9bn

Proceeds from the sale of Gates alone to the Onex Group, including co-investors, will be about $2bn. The sale is expected to close later this year and is subject to customary closing conditions and regulatory approvals.

Gates belts: under new ownership

Onex and CPPIB invested $2.1bn in the Tomkins acquisition. When the Gates sale is complete, they will have received aggregate proceeds of around $4.7bn, including prior distributions of $1.2bn – about 2.2 times the capital they invested and a return-on-investment of around 26% a year.

Gates manufactures power transmission belts and fluid power products used in industrial and automotive applications. Gates derives most of its income from replacement markets around the world.  Its headquarters are in Denver, Colorado, and it employs more than 14,000 people in 106 locations in 30 countries. In 2013, Gates reported a profit of $300m on revenues of $2,947m.

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