Despite strong opposition from major shareholder Standard Life Investments, the board of U.K. auto parts manufacturer Tomkins has backed the £2.89 billion (C$4.66 billion) offer from Canadian private equity firm Onex and the Canada Pension Plan Investment Board (CPPIB).
The offer represents a premium of about 41% to the share price prior to the offer eight days ago. It is also the year’s largest leveraged buyout, according to data from Thomson Reuters.
Tomkins chairman David Newlands described the transaction as fair, reasonable, and in the best interests of shareholders. The company’s independent directors have indicated that they will unanimously recommend to Tomkins shareholders to vote in favour of the offer.
However, Standard Life Investments, which owns a 2.97% stake in the firm, criticized the offer last week as far too low and providing “massive incentives” for management to deliver returns to private equity at the expense of current shareholders.
“In contrast to comments from chairman David Newlands, we do not expect the majority of Tomkins shareholders to support a deal whose valuation of the company is, without a shadow of a doubt, too low,” said Standard Life Investments’ head of U.K. equities David Cumming. “We expect that the requirement to gain 75% support for the scheme of arrangement will prove difficult. We remain opposed to the deal on the current terms.”
Onex and CPPIB have created a new company, Pinafore, to complete the deal, which is expected to close in late September. The transaction will be financed through a combination of debt and equity.
To comment on this story, contact us.