The Blackstone Group L.P.
) is set to close a deal with equity investment firms, namely
Onex Corp and the Canada Pension Plan Investment Board (CPPIB) to
acquire Gates Global Inc. Though the deal is expected to be
completed by next week, nothing has been confirmed officially as
the companies are yet to sign a legal agreement.
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Earlier, Blackstone along with private investment firm TPG
Capital Management LP had submitted a joint bidding price of $5.4
billion. The cited price failed to meet Gates Global's
expectations and this compelled TPG Management to back out from
Subsequently, Blackstone raised the offered price in the range of
$5.5-$6 billion. The new offer price is tentative according to
media reports and will be confirmed as and when the companies
come out with their press releases.
Gates Global caters to a wide range of industries such as oil and
gas, energy, mining, marine, agriculture, transportation and
automotive industries. Therefore, the aforementioned deal, which
is part of Blackstone's inorganic growth strategy, will expand
its reach to a diverse range of industries.
Gates Global reported sales from continuing operations of nearly
$2.9 billion for fiscal year 2013 (ended Sep 28). This generated
operating profit of $300.3 million, up 59.1% year over year.
Moreover, the company had assets worth $4.9 billion as of Dec 31,
2013. Considering these factors, Gates Global will likely be
profitable for a private equity firm like Blackstone, which is
constantly on the lookout for lucrative investment opportunities.
However, there is a chink in the armor. In Dec 2013, Gates Global
had filed for an initial public offering (IPO) and is yet to be
listed. If the IPO gets overwhelming response, the market value
of the company will increase. Therefore, if Blackstone is not
able to crack the deal before the public offering, it might have
to offer an amount higher than its latest quoted price.
At present, Blackstone has a Zacks Rank #3 (Hold). Some
better-ranked investment managers include
Fortress Investment Group LLC
Calamos Asset Management Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).