Related party transactions

6 Months Ended

Jun. 27, 2020

A. Entities affiliated with Blackstone

In January 2018, Gates and Blackstone Management Partners L.L.C. (“BMP”) and Blackstone Tactical Opportunities Advisors L.L.C., each affiliates of our Sponsor (the “Managers”), entered into a new Transaction and Monitoring Fee Agreement (the “New Monitoring Fee Agreement”). Under this agreement, Gates Industrial Corporation plc and certain of its direct and indirect subsidiaries (collectively the “Monitoring Service Recipients”) engaged the Managers to provide certain monitoring, advisory and consulting services in the following areas:

•advice regarding financings and relationships with lenders and bankers;

•advice regarding the selection, retention and supervision of independent auditors, outside legal counsel, investment bankers and other advisors or consultants;

•advice regarding environmental, social and governance issues pertinent to our affairs;

•advice regarding the strategic direction of our business; and

•such other advice directly related to or ancillary to the above advisory services as we may reasonably request.

In consideration of these oversight services, Gates agreed to pay BMP an annual fee of 1% of a covenant EBITDA measure defined under the agreements governing our senior secured credit facilities. In addition, the Monitoring Service Recipients agreed to reimburse the Managers for any related out-of-pocket expenses incurred by the Managers and their affiliates. During the three months ended June 27, 2020, Gates incurred $0, compared with $2.0 million during the prior year period, and during the six months ended June 27, 2020, Gates incurred $1.7 million, compared with $3.8 million during the prior year period, in respect of these oversight services and out-of-pocket expenses, of which there was no amount owing at June 27, 2020 or December 28, 2019.

Monitoring fee obligations under the New Monitoring Fee Agreement terminated in January 2020 upon the second anniversary of the closing date of the initial public offering of Gates.

In addition, in connection with the initial public offering, we entered into a new Support and Services Agreement with BMP, under which Gates Industrial Corporation plc and certain of its direct and indirect subsidiaries reimburse BMP for customary support services provided by Blackstone’s portfolio operations group to the Company at BMP’s direction. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period and Blackstone’s allocated costs of such personnel. During the periods presented, no amounts were paid or outstanding under this agreement. This agreement terminates on the date our Sponsor beneficially owns less than 5% of our ordinary shares and such shares have a fair market value of less than $25.0 million, or such earlier date as may be chosen by Blackstone.

B. Commercial transactions with sponsor portfolio companies

Our Sponsor and its affiliates have ownership interests in a broad range of companies. We have entered and may in the future enter into commercial transactions in the ordinary course of our business with some of these companies, including the sale of goods and services and the purchase of goods and services.

During the periods presented, our Sponsor held an interest in Custom Truck One Source (“Custom Truck”), a provider of specialized truck and heavy equipment solutions in North America. Net sales by Gates to Custom Truck were $0.1 million during the three and six months ended June 27, 2020, compared with $0 during the three and six months ended June 29, 2019.

C. Equity method investees

Sales to and purchases from equity method investees were as follows:


	Three months ended						Six months ended
(dollars in millions)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019
Sales	$	0.4	$	0.4	$	0.7	$	0.7
Purchases	$	(3.5)	$	(3.9)	$	(7.1)	$	(8.0)

Amounts outstanding in respect of these transactions were receivables of $0.1 million and payables of $0.3 million as of June 27, 2020, compared with receivables of $0 and payables of $0.2 million as of December 28, 2019. No dividends were received from our equity method investees during the periods presented.

D. Non-Gates entities controlled by non-controlling shareholders

Sales to and purchases from non-Gates entities controlled by non-controlling shareholders were as follows:


	Three months ended						Six months ended
(dollars in millions)	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019
Sales	$	12.0	$	12.4	$	24.5	$	25.8
Purchases	$	(4.2)	$	(4.9)	$	(9.3)	$	(10.3)

Amounts outstanding in respect of these transactions were as follows:


(dollars in millions)	As of June 27, 2020		As of December 28, 2019
Receivables	$	3.8	$	4.2
Payables	$	(3.2)	$	(5.9)

E. Majority-owned subsidiaries

During 2019, we finalized an agreement with the non-controlling interest holder in certain of our consolidated, majority-owned subsidiaries, regarding the scope of business of such subsidiaries, which resulted in a smaller share of net income allocated to non-controlling interests. This change was retrospectively effective from the beginning of 2019 and included a one-time adjustment of $15.0 million, which was recorded in the first quarter of 2019.