Executives at Gates Industrial Corp. have flouted many early criticisms of the Denver-based auto parts maker, filing for an impressive IPO that could bring in more than $100 million. The company, which focuses on producing top of the line power transmission belts as well as fluid power products, filed on Wednesday with the SEC for an IPO with a low-estimate of $100 million, but many of Gates’ backers see the company potentially bringing in hundreds of millions more.
High aspirations for the auto maker
Many analysts and investors are looking to Gates Industrial with some seriously high ambitions, with some reckoning that the company’s IPO could bring in a mammoth $500 million under the best circumstances. Even many of its early skeptics have come to admit that Gates is beating expectations, as the company had an impressive $2.75 billion in sales last year alone, and could be shaping up for an even more explosive 2018.
New initially surfaced back in August that the private equity firm Blackstone (NYSE:BX) Group LP, which acquired the auto parts maker for more than $5 billion a few years ago, was mulling over whether to take Gates public, and those ambitions seem to have materialized. Gates intends to be listed under the NYSE under the ticker “GTES,” though little other information, such as how many shares would be issued, is currently known. According to filings made by Gates, it intends to use much of the profits it gleams from its forthcoming IPO to pay off some $276 million in debt, which could pave the way towards eventual independence for the company.
After a few relatively lackluster years under Blackstone, which initiated serious cost-cutting measures to reduce waste and help urge further growth, Gates’ forthcoming IPO could be the first sign of a serious turnaround for the company, with some onlookers speculating that the company could be so successful as to raise $1 billion.
The company is well over 100 years old, and has long been a golden boy of Colorado’s economy, with its headquarters in Denver particularly popular and appreciated among residents of the centennial state. Whether Gates sees success over the coming decades could depend on how successfully the company branches out to the rest of the US and the world abroad, however, as many analysts believe that the future of the automotive industry will be driven by furthered globalization and cross-border trade.
Full speed ahead towards 2018
A successful IPO for Gates that nears the highest current estimates of some $500 million to $1 billion would make it one of the largest IPOs of the new year, and would certainly draw in appreciative headlines and serious confidence amongst early financial backers. With Citi, UBS Investment Bank, :Barclays, Morgan Stanley, Credit Suisse), RBC Capital Markets, and Goldman Sachs operating as joint bookkeepers for the deal, precious few onlookers are expecting a dull IPO.
Affiliates of Blackstone Group will retain a majority of voting power regardless of how many shares are eventually offered, according to Reuters, which likely means paying off the company’s rather high debt – which is just shy of $4 billion – will be a priority immediately after the IPO.
Having generated a net income of more than $84 million last year, with hundreds of customers in over 120 countries, most early financial backers of Gates expect it to see equally healthy financial results in 2018. The company’s focus on power transmission products and fluid power products has enabled it to seriously diversify the myriad industries that it serves, with Gates catering to the needs of industries as varied as agriculture, energy, and manufacturing.
If Gates follows the lead of many others in the auto part manufacturing industry, shifting operations overseas to cut cost, it would likely have to toe a fine line between angering domestic consumers unhappy to see jobs go while benefiting from seriously cut cost due to operating overseas. The company has already announced plans to relocate its headquarters, though it intends to make the move a local one, remaining in Denver. Ultimately, Gates’ IPO could end up being one of the blockbusters of 2018, and early backers of the auto parts maker aren’t likely to find themselves disappointed in the future. As long as it keeps paying down its debt and generating impressive profits, Gates’ future is looking rosier by the day.