Onex Says Deal Market Warming as Proceeds Set for Record

Aug 13, 2014 1:29 pm ET

(Updates with partner comments in second paragraph; Nigel Wright’s role in 11th.)

Aug. 13 (Bloomberg) -- Onex Corp., Canada’s largest buyout firm, said its deal pipeline is heating up at a time when proceeds from asset sales are poised to reach a record.

“We’ve seen a meaningful pickup in our pipeline,” Bobby Le Blanc, Onex senior managing partner, said on a conference call. “Too early to tell how that will translate into announced transactions but we certainly like the activity we see today relative to a year ago and even three months ago.”

Onex, which has about $22 billion assets under management, is set to reap a record $5.9 billion in proceeds together with its limited partners in 2014 as deals close in the second half of the year, Emma Thompson, head of Onex’s funds group, said in an e-mail today. Onex’s share will be a record $1.8 billion, the company said in its second-quarter earnings report today.

That would beat the previous record of $3.2 billion in 2011 of which Onex’s portion was $1.2 billion, Thompson said.

The challenge so for this year for Toronto-based Onex has been to find reasonably-priced acquisitions as access to easy credit had been driving up valuations.

Onex made its first acquisition of the year in July with the $1.33 billion buyout of Parsippany, New Jersey-based insurance claims services provider York Risk Services Group Inc. from ABRY Partners LLC. That investment will be the last for its Onex Partners III Fund as it turns its attention to opportunities for its new $5.15 billion Onex Partners IV fund.

The company had no debt and roughly $2 billion of cash on hand as of June 30, Onex said in a filing today.

Gerry Schwartz, Onex chief executive officer, said in a June interview, the dry spell prior to the York Risk Services transaction was largely because of the higher valuations Onex was seeing in the market.

Spirit Return

Instead, Onex had been taking advantage of the rise in prices by divesting $6.9 billion in assets along with its partners since the start of the year, according to data compiled by Bloomberg. That included the $5.4-billion sale of Gates Corp. to Blackstone Group LP in April, which it sold with its partner Canada Pension Plan Investment Board.

The firm also divested its remaining 22.4 million shares interest in Spirit AeroSystems Holdings Inc. between March and August for net cash proceeds of $729 million, the company said in its filings. That brings its total returns on the Spirit investment to $3.2 billion from its its original $375 million investment when it acquired the airplane parts manufacturer from Boeing Co. in 2005, the filings say.

London Office

Onex announced last month that Nigel Wright, one of its former managing directors and a former top aide to Canadian Prime Minister Stephen Harper, had returned to the firm in its London office. Le Blanc said Wright would be working under senior managing director Anthony Munk as Onex makes a push into Europe.

“We’re building a real team over there and we expect there to be good opportunity there over time,” Le Blanc said.

Wright took a leave of absence from Onex to become Harper’s chief of staff in 2011. He resigned his position in May 2013 after accepting sole responsibility for writing a C$90,000 ($82,000) check to help Canadian Senator Mike Duffy repay improperly claimed expenses.

The Royal Canadian Mounted Police said in April Wright wouldn’t face charges in the matter.

Onex reported second-quarter net earnings of $39 million, or 80 cent loss per subordinate voting share, compared with a loss of $718 million, or $5.38 a share loss, a year ago.

Revenue for the quarter fell 1 percent to $5.2 billion.

Onex said its quarterly financial results don’t follow any specific trends due to acquisitions and dispositions of businesses, changes in the value of its publicly traded and privately held operating companies and varying business cycles at its operating companies.