Onex Corp. Leads Buyouts Totaling $1B –

Onex Corp. in the last several weeks has led two buyouts that have a total value of more than $1 billion, as the group looks to build platforms in new industries.

The New York- and Toronto-based firm last month led a $610 million buyout of J.L. French Automotive Castings, a manufacturer of aluminum die-cast automotive parts, from Windward Capital Partners. Onex plans to grow the company through acquisitions. The firm believes auto manufacturers increasingly are moving to building lighter-weight cars that will lead to growth in the niche.

Onex is committing $90 million in equity for an approximate 50% stake and majority control of the Sheboygan, Wis.-based company. Co-investors on the deal include Norwest Ventures, Northwestern Mutual Life Insurance Co. and BankAmerica Capital Investors. Windward, a New York buyout firm, is retaining a 20% stake in the business. Bank of America and Chase Manhattan Corp. are the lead lenders.

At the same time, Onex has agreed to acquire American Buildings Corp., a manufacturer of steel doors and roofs, for $405 million. The group is committing $145 million in equity for the public company, paying a 65% premium to its share price days before it made the offer. CIBC Wood Gundy is the senior lender.

The firm believes it can grow the Eufala, Ala.-based company through acquisitions and by increasing the number of products it sells, said Eric Rosen, an Onex managing director.

Onex paid 12.7 times 1998 earnings for the business. It paid between a six and seven times EBITDA multiple based on 1999 figures for J.L. French, Mr. Rosen said.

With the number of firms making platform investments increasing over the last three years, some buyout groups have started to move away from the buy-and-build approach because of the competition to consolidate new industries, but not Onex. “We have not shied away; we like it and we understand it,” Mr. Rosen said. He added he believes firms cannot generate outstanding returns today without building platforms, although he admitted it is harder to consolidate an industry now than a year ago.

Onex is a publicly traded buyout firm and will not need to hold a secondary offering to fund its most recent investments. It has about $800 million on hand to invest in new buyouts after these investments, Mr. Rosen said.