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‘It was a tough decision to sell Gates,’ Onex senior managing director Seth Mersky said in a statement Friday.Tibor Kolley/The Globe and Mail

Onex Corp. and the Canada Pension Plan Investment Board have signed a deal to sell the automotive parts manufacturing division of Tomkins Plc for $5.4-billion (U.S.), marking the eighth and largest sale of a Tomkins unit since the two partners acquired the British firm in 2010.

Onex and CPPIB said Friday they will sell Denver-based Gates Corp. to private equity funds affiliated with U.S. investment firm Blackstone Group in a deal expected to close later this year.

Since purchasing Tomkins in 2010 for $5-billion, Onex and CPPIB have sold eight of the conglomerate's operating units for gross proceeds of $7.9-billion. Tomkins operated a number of general industrial, automotive and construction businesses around the world.

Proceeds from the Gates sale alone will be about $2-billion, which includes $550-million for Onex and $1.5-billion for CPPIB, the partners said. The sales mean virtually all of Tomkins' former operations have now been divested. The only remaining significant asset is bathroom product manufacturer Aquatic, plus various real estate assets.

CPPIB and Onex have recorded huge gains from their initial Tomkins investment. The initial $5-billion purchase of Tomkins in 2010 included $2.1-billion of equity investment by CPPIB and Onex, while the rest was financed by debt.

The partners said in a release Friday that they reaped profits of $4.7-billion on the investment – including a $1.2-billion payout by Tomkins to its owners in December – which means they have earned a return on their investment of about 26 per cent per year.

"It was a tough decision to sell Gates," Onex senior managing director Seth Mersky said in a statement Friday. "We don't see many industrial businesses with its global brand recognition. Nonetheless, Onex shareholders and our limited partners have done very well."

André Bourbonnais, CPPIB's senior vice-president of private investments, said Tomkins was "an excellent investment" for the pension fund.

"We have enjoyed a very successful partnership with the Tomkins management team and Onex. We believe Gates is poised for continued outperformance."

Gates manufactures power transmission belts and fluid power products used in industrial and automotive applications. Most of its sales come from replacement parts markets around the world.