Onex-backed Tomkins to sell auto safety unit-sources

By Soyoung Kim

NEW YORK (Reuters) – British industrial group Tomkins has put its Schrader automotive safety component business on the auction block, nearly a year after the company was taken private in a $5 billion leveraged buyout, people familiar with the matter said.

Barclays Plc’s Barclays Capital and Goldman Sachs Group Inc are running the Schrader sale, which is expected to fetch less than $1 billion, these people said.

Canada’s biggest private equity firm, Onex Corp , and the Canada Pension Plan Investment Board (CPPIB), which manages the country’s national pension fund, bought Tomkins Plc for $5 billion, including debt late last year, in one of 2010’s largest leveraged buyouts.

The Schrader division makes tire pressure monitoring systems, a rapidly growing segment of the auto industry thanks to tighter safety regulations around the world that require systems that prevent tire failure.

Schrader customers include General Motors Co, Ford Motor Co, BMW AG, Nissan Motor Co Ltd and Fiat SpA among other auto manufacturers.

The divestiture comes at a time when an increasing number of auto industry assets are evaluating a sale or initial public offering, to take advantage of investor confidence that the industry has come through the punishing downturn of the past years with sharply lower costs and higher profit potential.

Delphi Automotive, which emerged from bankruptcy in 2009 under the ownership of hedge funds, last month filed for an initial public offering that people familiar with the matter said could raise $1 billion to $1.5 billion.

Allison Transmission, which makes automatic transmissions for trucks, buses and military vehicles, and billionaire investor Wilbur Ross’ International Automotive Components Group are also among companies planning IPOs this year.

The auction for Schrader, launched this week, is expected to draw interest from private equity firms and strategic buyers, companies that operate in the same industry as the seller, people familiar with the matter said.

Tomkins, which also makes industrial hoses and bathtubs, was once one of Britain’s largest industrial groups and dubbed the “buns to guns” conglomerate in its 1990s heyday because it owned both food group Rank Hovis McDougall and .357 Magnum maker Smith & Wesson.

Its stable of companies includes Gates, the U.S. maker of belts and hoses for cars and machines.

Schrader, whose financial results are reported under Tomkins’ Sensors & Valves segment, increased its sales 28 percent to more than $400 million in 2010, while its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) more than doubled to $60 million.

In the first three months of 2011, the Schrader division posted $23.5 million in EBITDA on sales of $120 million – double-digit increases in both earnings and sales — driven by higher vehicle production volumes in North America and the growing adoption of tire pressure monitoring systems in emerging markets.

Representatives for Onex, CPPIB, Barclays and Goldman Sachs were not immediately available for comment. (Reporting by Soyoung Kim; editing by Andre Grenon, Gary Hill, Bernard Orr)