The deal, first announced in mid-December, had been held up by a technical hitch "unrelated to either Tomkins or the business", according to Greg Hutchings, the British group's executive chairman. Denver-based Gates gives Tomkins the world's biggest manufacturer of power transmission belts and hose products for the automotive industy.
The terms of the acquisition involve the issue by Tomkins of $696m (pounds 461m) of perpetual convertible preference shares, yielding 6.7 per cent, and $464m (pounds 307m) in redeemable convertible preference shares, yielding 5.25 per cent. Full conversion would involve the issue of ordinary shares equivalent to 15.7 per cent of Tomkins' existing ordinary capital.
The family trusts which control Gates have said they have "no current plan or intention" to sell the shares they receive as a result of the deal. Charles Gates, chairman, chief executive and president of Gates, has accepted an invitation to join the board of Tomkins as a non-executive director.
Mr Hutchings said yesterday the strategy would now be to develop the Gates business into new geographical areas, where there was growing demand for cars, trucks, computers and photocopiers - all products in which Gates' belts are used. The US group is already represented in Japan, South Korea and various Latin American countries. The plan is to follow big manufacturers like Ford into developing areas like India and China.
Current investment plans would be maintained or possibly even increased, Mr Hutchings said. With Tomkins' net cash pile currently standing at pounds 300m and Gates' borrowings standing at $250m, the deal would not add to gearing.
The deal was broadly welcomed by analysts yesterday, with Tomkins' shares adding 1.5p to 281p. Martin Bomford of UBS described it as "fair and reasonable without looking stunningly attractive". He suggested there would not be much scope for further recovery in a business already making margins of 8 per cent. He calculated the exit multiple at 15, based on estimated profits of around $110m for last year.