Following a protracted set of negotiations, Blackstone Group has at last secured a huge $5.4billion deal to acquire auto parts manufacturer Gates Global Inc. The deal is the second largest of 2014 to date, with details of the deal, which was finalised late on Friday 4th April, being reported by Private Equity News.
Blackstone had been speaking to Onex Corp. and the Canadian Pension Plan Investment Board for a number of weeks, with TPG Capital originally forming part of the bid alongside Blackstone. Blackstone, who are heading a large consortium of investors involved in this takeover, now stand alone as the headline group after TPG raised concerns about the number of stakeholders involved in the consortium set up.
The names of the individuals or the groups that are involved alongside Blackstone have not been shared, although we expect there to be some announcements related to this in the coming days and weeks. As a result of the deal, Blackstone is expected to look at focusing on markets where the automobile industry is growing and likely to deliver high returns for Gates Global. Blackstone are also targeting markets such as China, where there is an expectation that demand for replacement parts, both from mechanics as well as individuals, will grow in the near future.
It is well known that Blackstone already owns a number of businesses that are potentially going to be able to have some input into Gates Global and enable them to improve efficiency through operational changes as well as develop revenue streams. The sale to Blackstone ends a turbulent period for Gates Global, who had been discussing whether an IPO or sale to a private equity firm was the best option. An IPO could have generated more money, but that cash would have taken longer to reach shareholders, which is the likely reason the immediate sale deal was reached.