* KKR, TPG-Onex consortium advance to second-round bidding
* Blackstone, Bain out of auction now -sources
* Gardner Denver received initial offers last week -sources
* Buyers do not see much premium over current prices
By Soyoung Kim and Greg Roumeliotis
NEW YORK, Nov 15 Private equity firm KKR Co & LP
and a partnership of buyout firms TPG Capital and Onex
Corp advanced to the next round of bidding for Gardner
Denver Inc, several people familiar with the matter said
The industrial machinery maker shortlisted a small group of
bidders on Tuesday, including the two private equity groups,
after reviewing initial takeover offers submitted last week, the
Blackstone Group LP and Bain Capital, which were
participating in the auction process, did not advance to the
second round of bidding, they said.
Gardner Denver, which has a market value of around $3.4
billion and makes compressors, pumps and vacuum products for
industrial uses, said last month that it is exploring a
Gardner Denver hopes to negotiate with a small group of
bidders and let the parties conduct intensive due diligence
through year-end, and potentially announce a transaction in
January, two of the people said.
Industry rival SPX Corp, which has a market value of
roughly $3.3 billion - just below that of Gardner Denver - and
private equity firm Advent International also evaluated bids,
the people said. It could not be immediately learned on Thursday
if SPX or Advent were among the shortlisted bidders.
Gardner Denver declined to comment on the sale process.
Representatives for Onex and Advent did not immediately respond
to requests for comment. TPG, Blackstone, Bain and SPX declined
People familiar with the matter expect private equity
eventually to prevail in the auction for Gardner Denver, as
valuation has become expensive for publicly traded industry
competitors that have seen their own stock prices languish over
the past year.
In July, United Technologies Corp sold its Hamilton
Sundstrand industrial businesses to Carlyle Group LP and
BC Partners for $3.46 billion, following an auction that
attracted interest from several industry players including SPX
and Dover Corp.
Shares of Gardner Denver have risen 27 percent since the
company said on Oct. 25 it was exploring a potential sale,
confirming what sources had earlier told Reuters. The stock
ended up 0.9 percent at $69.58 on the New York Exchange on
Gardner Denver has grappled with lower demand for petroleum
and industrial pumps, which pressured its engineered products
group. That group reported a 20 percent drop in revenue in the
Credit Suisse analyst Julian Mitchell said in a research
report last month that a take-out of the company could occur in
the $70s per share, and said the stock is inexpensive at current
levels even if a sale does not occur.
But some buyers expect Gardner Denver's earnings to decline
further next year, making it tough for them to bid much higher
on the company's current share prices, which have already
rallied on the prospects of a takeover, sources said.
The auction of Gardner Denver follows months of pressure
from activist investor ValueAct Capital LLC, which has been
calling for a sale of the company after acquiring a stake of
roughly 5 percent.
The shareholder campaign followed the sudden resignation of
Chief Executive Barry Pennypacker earlier this summer and his
interim replacement by Chief Financial Officer Michael Larsen.