NEW YORK Industrial machinery maker SPX Corp SPW.N is pursuing a potential merger with rival Gardner Denver Inc GDI.N, competing with three private equity groups that are also bidding for the company, five people familiar with the matter said.
Private equity firms Advent International, KKR Co & LP (KKR.N) and the partnership of TPG Capital and Onex Corp (OCX.TO) are the buyout suitors involved in the second round of bidding for Gardner Denver, the people said this week.
Reuters reported on November 15 that the company had short-listed a small group of bidders, including KKR and the TPG-Onex pair, for the next round of bidding after reviewing first-round bids.
Gardner Denver, which has a market value of roughly $3.3 billion, is expected to negotiate with the parties through the year-end for a potential deal early next year, the people said.
Gardner Denver and the private equity firms have declined to comment on the sale process. SPX did not immediately respond to requests for comment.
The Wayne, Pennsylvania-based company, which makes pumps and vacuum products for industrial uses, said last month that it is exploring a potential sale, confirming a Reuters report.
It remains to be seen if SPX could eventually prevail in the auction, as Gardner Denver's 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 (UTX.N) sold its Hamilton Sundstrand industrial businesses to Carlyle Group LP (CG.O) and BC Partners for $3.46 billion, following an auction that attracted interest from several industry players including SPX and Dover Corp (DOV.N).
Shares of Gardner Denver have risen nearly 25 percent since the company said on October 25 it was exploring a potential sale. The stock was up 1.3 percent to $68.71 on the New York Exchange on Wednesday.
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 third quarter.
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.
(Reporting by Soyoung Kim in New York, additional reporting by Greg Roumeliotis; Editing by Gary Hill)