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Canadian Pension Plan Investment Board.MARK BLINCH/Reuters

The Canada Pension Plan Investment Board has agreed to pay $1.1-billion for the air distribution division of Tomkins, a diversified U.K.-based industrial company that the fund manager owns with Onex Corp.

The division makes products used in heating, ventilating and air conditioning systems for commercial and residential buildings.

"Through our joint ownership of Tomkins since 2010, we have acquired deep knowledge of the air distribution business and have built strong relationships with management," said Andre Bourbonnais, senior vice-president of private investments at CPPIB.

"With this acquisition, we will acquire directly a significant majority interest in the air distribution division, including the portion that we don't currently own indirectly through Tomkins."

Onex and the CPPIB acquired Tomkins in a $5-billion (U.S.) deal in September 2010. Each owns a 50 per cent interest in the company.

The core business at Tomkins is its Gates subsidiary, a manufacturer of power transmission belts and hydraulic hoses for the industrial and automotive aftermarket.

Since the CPPIB-Onex acquisition, the company has sold five non-core businesses for total proceeds of almost $1-billion, which has been mostly used to reduce the company's debt.

"With the sale of air distribution, we're nearing completion of our planned disposition program well ahead of schedule," said Seth Mersky, a managing director at Toronto-based Onex.

"We can now focus our efforts on building value in the core Gates business with a significantly de-levered capital structure."

The deal is expected to close in the fourth quarter but other financial details of the transaction weren't disclosed.