In the next month, two of Canada's most powerful investors will take over storied British conglomerate Tomkins PLC , delist its shares from the London Stock Exchange, and weigh plans to move its chief decision makers to the U.S.
In doing so, Onex Corp. and the Canada Pension Plan Investment Board (CPPIB) will have pulled off one of the biggest leveraged buyouts since the financial crisis. The shrewd bid, which faced some stinging criticism, shows how Canada's economy has evolved in the years since the hollowing-out debate raged here, and how quickly protectionist sentiment is rising in countries such as Britain and Australia.
BHP Billiton Ltd.'s $38.6-billion (U.S.) bid for Saskatoon-based Potash Corp. of Saskatchewan Inc. has, thus far, not resulted in a nationalistic backlash in Canada, in stark contrast to the strong opposition to bids for former Canadian heavyweights such as Alcan, Falconbridge, Inco, Stelco and Dofasco in years gone by.
But the Canadian consortium's efforts to scoop up manufacturing group Tomkins with more than 25,000 employees around the world has raised the ire of Britons who fear that too many home-grown companies will be sold to foreigners who are taking advantage of the damage that the financial crisis inflicted on country's currency and economy.
The deal also illustrates the degree of power that Canada's institutional investors now hold on the world stage. CPPIB is also in the final stages of a $3.4-billion takeover of Australia's Intoll Group, a bid that is similarly contributing to fears of a hollowing-out Down Under.
More than 90 per cent of votes cast by Tomkins' shareholders Tuesday approved the $4.5-billion bid for the company.
But David Cumming, head of British equities at Standard Life Investments, said he continues to believe that the offer undervalues Tomkins. "We also hope that this vote will not be seen as a signal to other potential bidders for U.K. corporates that U.K. shareholders are prepared to sell assets too cheaply as a consequence of current depressed market conditions," he said.
Onex and CPPIB are still finalizing the plans to move Tomkins' relatively small London head office to the U.S., according to people close to the situation.
Tomkins has two main divisions: industrial and automotive, which accounts for about three-quarters of its sales and makes everything from power transmission products to trailer axles, and the building products segment, which accounts for the remaining 25 per cent of revenue and makes products such as bathtubs and shower enclosures.
The company had been revered as one of Britain's biggest industrial groups, formerly dubbed the "buns to guns" conglomerate because its businesses included a baking ingredients firm and a handgun maker, but it has streamlined its operations since the late 1990s.
Chief executive officer Jim Nicol will move to North America as part of the deal. Mr. Nicol, who was president of Magna International Inc. before joining Tomkins in 2002, is highly respected in Canada. It's understood that the company's future owners are supportive of the restructuring that he's embarked on in the last two years, and intend to see it through without the spotlight that's imposed on public companies.
In early 2008, Tomkins initiated "Project Eagle," a three-year improvement program designed to reduce costs and bolster Tomkins' competitiveness. That was followed in 2009 by "Project Cheetah," which took the goals a step further by shifting many of the company's manufacturing activities to lower-cost locations and putting a bigger emphasis on higher-growth markets, leading to new facilities in China, India, and Turkey. The company cut more than 5,600 jobs and 19 facilities in 2009.
Moves such as Tomkins 1996 purchase of U.S.-based Gates Corp. and the sale of British businesses such as baking ingredients maker Rank Hovis McDougall have left the company more tied to the U.S. than its homeland.