Exclusive: Blackstone close to $5.5 billion-plus Gates takeover - sources

Tue Mar 25, 2014 6:03pm EDT
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By Soyoung Kim and Greg Roumeliotis

NEW YORK (Reuters) - Blackstone Group LP (BX.N: Quote) is close to a deal to buy industrial conglomerate Gates Global Inc for more than $5.5 billion, people familiar with the matter said, in what would be one of the largest leveraged buyouts so far this year.

The buyout firm is in the final stages of negotiations with Gates' private equity owners, Onex Corp OCX.TO and the Canada Pension Plan Investment Board (CPPIB), and the two sides are aiming to finalize an agreement by early next week, the people said on Tuesday.

Blackstone is preparing to do the deal on its own after another buyout firm, TPG Capital Management LP TPG.UL, with which it had teamed up to submit a joint bid two weeks ago, decided not to back a higher bid to meet Gates' price expectations, the people said. The pair had bid around $5.4 billion then, one person said.

The final deal price could not be learned, but the transaction is now expected to value the auto parts and building products maker at between $5.5 billion and $6 billion including debt, according to the people.

Blackstone has yet to complete confirmatory due diligence and a deal has yet to be signed, cautioned the people, who asked not to be named because the matter is not public.

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

Reuters reported last week that Blackstone was working on a higher takeover bid for Gates after its previous offer was turned down as too low by Onex and CPPIB.

A deal for Gates would mark the second-largest private equity deal reached so far this year following Cerberus Capital Management LP's $9.4 billion merger of its Albertsons supermarket chain with Safeway Inc SWY.N, which was announced earlier this month.   Continued...

Stephen A. Schwarzman, Chairman and Chief Executive Officer of The Blackstone Group, looks on during an interview with Maria Bartiromo, on her Fox Business Network show; "Opening Bell with Maria Bartiromo" in New York February 27, 2014. REUTERS/Brendan McDermid