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CPPIB, Onex seal $5.4bn exit to Blackstone

The sale of Gates Corporation will result in a 2.2x return multiple and 26% IRR for both CPPIB and Onex. 

The Canada Pension Plan Investment Board and Onex Corporation will sell Denver-based Gates Corporation, a division of UK engineering company Tomkins, to The Blackstone Group for about $5.4 billion. Gates manufactures power transmission belts and fluid power products for the automotive industry.

Including prior divestments, the transaction will result in a 2.2x return multiple and 26 percent IRR for both CPPIB and Onex, according to a statement. The sale will generate proceeds of $2 billion for the Onex Group and its co-investors, of which Onex Corporation’s sale will be $550 million, including carried interest. CPPIB will generate proceeds of $1.5 billion from the sale. The transaction is expected to close later this year.

Debt financing for the deal will be provided by Credit Suisse, Citibank, Goldman Sachs, Morgan Stanley, Deutsche Bank and UBS. Blackstone is currently investing its Blackstone Capital Partners VI fund, which closed on $16.27 billion in 2012.

Including the Gates sale, CPPIB and Onex have sold eight divisions of Tomkins, generating total proceeds of $7.9 billion. Other divisions the firms have sold include Northern Ireland-based auto accessories company Schrader International, sold to Madison Dearborn Partners for $505 million last March.

Onex Partners, the main private equity platform within the publicly listed asset management firm, took Tomkins private alongside CPPIB in 2010 for $4.7 billion. The two groups invested $2.1 billion in connection with the deal. Onex purchased Tomkins using capital from its third private equity fund that closed on $4.3 billion in 2009.

CPPIB recorded a 16.8 percent return on its private equity investments in foreign developed markets for the fiscal year ending March 2013. The C$192.8 billion pension plan was the most active fund investor in private equity during the 12-month period ending 31 March 2013, committing $3.99 billion to funds, according to Private Equity International’s Research and Analytics division.

Onex is currently raising its Fund IV, which has a target of $4.5 billion. A recent investment memorandum reviewed by PEI suggests the fund’s hard-cap is $5 billion. Onex has raised about $4.85 billion for the fund, according to documents filed with the US Securities and Exchange Commission.