The company's Securities & Exchange Commission filing of 27 Dec showed plans to list on the New York Stock Exchange under the symbol GTES, and for current owner Blackstone Group LP to retain a majority of the voting power.
The filing does not include the total number of shares to be issued or the anticipated price. It does list a proposed maximum aggregate offering price of $100 million (€83.1 million) as a placeholder figure likely to change.
The net proceeds from the offering will be used to redeem $283.1 million of its 5.75% senior notes and an additional number of its 6% senior notes, both due in 2022. The remainder, if any exist, can be used to repay other outstanding indebtedness.
There are no current plans to pay dividends on ordinary shares.
The deal is a leveraged buyout, where the offering will be used to pay down debt, according to Kathleen Smith, principal and manager of IPO exchange-traded funds for Renaissance Capital. Based on the size of the business and its track record, Smith said the deal could be worth about $500 million.
"We are estimating that it's a $500 million IPO, which is a decent-sized IPO," she said. "Larger deals tend to be of more interest to investors, so it looks like it will be sizeable enough to have interest. The median deal size was $120 million in 2017, so it'll likely be one of the larger deals for 2018."
During 2016, Gates reported sales of $2.75 billion, with a net income of $84.3 million, according to the SEC document. For the first nine months of 2017, net sales increased 8.7% to $2.26 billion from $2.08 billion for the same period in 2016. Net income through September was $52.5 million, compared to $69 million in 2016, a decrease of 32%.
The filing lists the company's total indebtedness at about $3.92 billion.
Gates has about 13,500 employees worldwide, with about 5,500 located in North America; 3,000 in Europe, the Middle East and Africa; 4,000 in China and East Asia; and 700 in South America. The company, with its corporate operations centre in Denver, has a presence in 30 countries.
Along with the spaces left for total number of shares and market cap, timing for the IPO also is unknown. That could mean more details to come in a few months as the deal proceeds, Smith said.
"It could be this deal doesn't come until March or April at the earliest," she said. "It costs a lot of money to get where they are now. So they have an intention of moving along. But there's a lot of blanks in here."
Overall, she said the company's timing for an IPO is positive, as similar leveraged buyouts in 2017 have performed well. Of the 17 LBOs last year, nine were priced below the midpoint of their range, meaning they didn't receive the requested price. Investors have been cautious of highly leveraged companies.
"However, once they came out, they have traded well," Smith said. "This group last year of leveraged buyouts returned 35.5%, so they had a very strong performance."
As a group, leveraged buyouts and industrial companies in particular are of interest to investors, she said. More LBOs are expected for 2018.
"I think their timing is good, for this type of business, for Gates," she said.
