CPPIB, Onex make £3bn play for Tomkins

The Canadian private equity investors are at ‘advanced’ stages of due diligence for what would be the largest UK LBO this year.

Two of Canada’s largest private equity investors, Onex Corp and the Canada Pension Plan Investment Board (CPPIB), have made a £2.9 billion offer to de-list UK engineering company Tomkins.

Tomkins confirmed a 325 pence per share preliminary offer in a regulatory filing, which noted due diligence was at an “advanced stage”.  It stressed a formal offer might not materialise, or could be for a lesser price.

If the deal comes to fruition, it would be the largest LBO agreed in the UK this year and mark the second deal for Onex Partners’ third private equity fund.

Onex Partners, the main private equity platform within the publicly listed asset management firm, closed its third private equity fund on $4.3 billion in 2009. Its only investment to date has been a $45 million co-investment in Tropicana Las Vegas, giving the firm a 15 percent stake in the famous hotel and casino, according to Onex’s website. It acquired Tropicana out of Chapter 11 bankruptcy.

The $120 billion CPPIB, which makes both fund commitments as well as principal investments, invests on behalf of Canada’s largest single-purpose pension.

Tomkins, which has sales of around £3 billion, has two main business groups, one of which makes products for industrial and automotive sectors, and one of which supplies goods to the construction industry including bathtubs and heating and air conditioning products.

The UK company noted its performance has been improving throughout 2010, with momentum continuing from when it reported 29 percent year-on-year sales growth in its interim management statement on 6 May. It cautioned however that the performance was strong in part due to a weak comparable period and noted there were signs in recent weeks that some of the company’s key markets – the automotive sector and construction industry – were softening.