Private equity firm, Canadian pension board in $4.37B bid for UK’s Tomkins

TORONTO: Private equity firm Onex Corp. and the Canada Pension Plan Investment Board have made a joint bid worth nearly US$4.4 billion to acquire British engineering and manufacturing company Tomkins PLC.

Tomkins said Monday it had received a tentative takeover offer worth about 2.87 billion pounds (C$4.6 billion) from the Canadian investment entities and has agreed to allow the consortium to conduct due diligence.

The proposal is one of the biggest deals ever made by Onex, a company with diversified manufacturing operations in North America and which is run by financier Gerry Schwartz. A few months ago, Schwartz said the climate for deal-making had improved, an indication the company was preparing for a major takeover.

But Tomkins said there is no certainty that a firm offer will be forthcoming.

London-based Tomkins says the consortium had made an approach to pay 325 pence per share. The company’s shares were up 33 per cent to 306.1 pence in late morning trading in London.

Tomkins has two business divisions, with the primary business making systems and components for automobiles and industry, while the other handles air systems components and bathroom fixtures.

The company reported a loss of $15.5 million for the year ending Jan. 2, following a $64.6 million loss a year earlier.

Neither the CPP investment board nor Onex would answer questions about the joint bid.

“We note the announcement made by Tomkins PLC about the proposal they have received from CPPIB and Onex,” said pension manager spokeswoman Linda Sims in an email to The Canadian Press.

“We have no further comment at this time.”

Onex (TSX:OCX) issued a similar statement. Its shares were up 11 cents to $25.18 in early trading on Monday.

Paul Holden, a financial analyst with CIBC World Markets, says Onex’s play for Tomkins would be one of its largest investments and would fit nicely into the diversified firm’s portfolio.

The asset manager already owns operations in the electronics manufacturing services, aerostructures, healthcare, financial services, customer support services, metal services and other industries.

“It’s not surprising … They have the management experience and capability of running that type of business,” Holden said, noting that the company has a very high success rate with acquisitions it has made in the past.

“This would be a large one for them, so I’m sure they’ve really done their homework and have a strategic plan in place to realize additional value out of the business,” he said.