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Onex ‘in position’ to launch fourth mid-market fund

  • Fund III was more than 75 pct invested as of March 31
  • No target indicated yet for Fund IV
  • Fund III shows gross 30 pct return as of March 31

Onex Corp said it is preparing to launch its fourth mid-market private equity fund, now that Oncap III is approaching full investment.

In its report of first-quarter 2016 results, Toronto-based Onex said it was “now in a position” to raise Oncap IV, since its predecessor was more than 75 percent invested as of March 31. Oncap III has so far invested in seven companies and completed 14 add-on acquisitions.

Onex did not give a target size for Oncap IV. Oncap III collected C$800 million in a final close in September 2011.

Led by Managing Partner Michael Lay, Oncap has operated as Onex’s mid-market-investment platform since its debut fund was established in December 1999.

Focused on acquisitions of businesses in a range of North American industries, it has consistently raised larger amounts of third-party capital with each new fund offering.

Onex has taken a substantial equity stake in all prior Oncap funds. The firm chipped in C$252 million for Oncap III, giving it about 31 percent of total capital committed.

At the end of March, Oncap III’s portfolio was showing a gross internal rate of return of 30 percent and a net return of 20 percent, Onex noted in its first-quarter report. As of March 31 the fund was showing a gross multiple of 2.1x invested capital and a net multiple of 1.6x.

Oncap makes significant minority or control-equity investments of C$50 million to C$100 million in partnership with company management teams.

Its most recent platform deals, announced in mid-2015, are Chatters Canada, a specialist in hair-care products and services, and Ingersoll Tools Group, a maker of agricultural-equipment components.

Lay, who previously served as a senior PE executive at Ontario Teachers’ Pension Plan, oversees an Oncap team of some 19 investment pros.

Onex makes large-cap investments via Onex Partners IV, which raised US$5.7 billion in May 2014.

Photo: The moon rises over the Toronto city skyline as seen from Milton, Ontario, on January 23, 2016. Courtesy Reuters/Mark Blinch