Gates Industrial Corporation Announces Pricing of Secondary Offering
Gates Industrial Corporation plc, a global manufacturer of power transmission and fluid power solutions, has announced the pricing of a secondary offering of 17,500,000 ordinary shares by certain selling stockholders affiliated with Blackstone Inc. The shares will be offered by the underwriters on the New York Stock Exchange, over-the-counter market, or through negotiated transactions at market prices or at prices related to the market. The offering, expected to close on February 16, 2024, includes a 30-day option for underwriters to purchase up to an additional 2,625,000 shares. It is important to note that Gates will not be offering any shares nor receiving any proceeds from this offering.
Citigroup, Goldman Sachs & Co. LLC, and Jefferies are leading the management of the offering, with several other financial institutions participating as joint book-running managers.
In a concurrent move, Gates has also announced a share repurchase agreement with Citigroup Global Markets Inc. to buy back $50 million worth of ordinary shares at the same price paid by the underwriters in the secondary offering. This repurchase, totaling 4,151,100 ordinary shares, will be executed promptly after the offering concludes, contingent upon its closing.
Furthermore, certain Gates directors have shown interest in purchasing approximately 1,050,000 ordinary shares in the offering, although this is not a binding commitment and may result in a lesser number of shares being sold to them.
Company Performance and Valuation
Data from InvestingPro reveals that Gates Industrial has a market capitalization of $3.29 billion. Its P/E ratio has adjusted to 13.78 over the last twelve months as of Q4 2023. The company’s revenue during the same period was reported at $3.57 billion, indicating a slight growth of 0.45%.
Gates management’s active share buybacks reflect confidence in the company’s future prospects. Moreover, the company has remained profitable over the last twelve months. However, it’s worth noting that three analysts have revised their earnings expectations downwards for the upcoming period, raising concerns about future profitability.
Investors may also find the company’s current valuation metrics interesting. Gates Industrial is trading at a high P/E ratio relative to near-term earnings growth, with a PEG ratio of 1.61 as of Q4 2023. While the company’s stock price movements have been quite volatile, with a 1-year price total return of -7.58%, its liquid assets exceed short-term obligations, suggesting a solid financial footing.
Analyst comment
Positive news. Analysts predict that the market will react positively to the secondary offering and share repurchase agreement. Gates Industrial’s confident share buybacks and profitable past performance contribute to investor confidence. However, downward earnings revisions may impact future profitability, and the high P/E ratio relative to earnings growth may present a concern.
