The planned initial public offering of Gates by its private equity owner Blackstone Group isn't the flashy type of IPO that will capture the imagination of the public and media like Facebook did when it raised $16 billion in 2012.
But it is the kind of offering that makes up the majority of IPOs the general public doesn't hear much about, those for companies with solid fundamentals that have a good chance at providing investors with a decent return on their investment.
The registration filing with the U.S. Securities & Exchange Commission states Blackstone's intention simply: It wants to pay down some of the debt it incurred with its 2014 leveraged buyout of Gates. The PE firm acquired the Denver-based manufacturer of power transmission and fluid power products for about $5.4 billion and, according to its SEC filing, still has nearly $4 billion in debt.
Blackstone is following the trend of companies—such as Eaton a few years back—of registering the public entity outside the U.S., with the Gates Industrial Corp. P.L.C. entity organized in September under the laws of England and Wales.
Many of the details weren't finalized in the preliminary IPO filing, though Blackstone will maintain majority control of Gates. Among the blanks yet to be filled in are the number of shares to be issued, when the IPO will be launched, and what the shares will be priced at. It lists $100 million as the amount to be raised, but one analyst firm says $500 million is a realistic target.
Gates' officials are under what is known as a "quiet period," where company executives can't publicly promote the stock until after regulators approve the filing. For typical IPOs, after approval comes a "road show" to drum up interest and convince institutional investors to purchase shares once they are issued.
The SEC filing does give some glimpse of what Gates will emphasize. It's a more than century-old company with a well-recognized brand name that—under Blackstone ownership—has put together almost an entirely new management team that has embarked on a restructuring plan that allows the firm to focus on growth initiatives.
It also says it's the top global player in power transmission belts; gets 83 percent of revenues from products in which it has a top three market position; garners 23 percent of revenues from emerging countries; and places a high priority on innovation.
One stock analyst who follows IPOs says of 17 similar deals last year, nine didn't initially reach their target price. But once in the market, the group returned 35 percent on the investment.
That's the kind of performance Blackstone and Gates are banking on.