Onex Partners IV has raised a total of US$3.7 billion in capital commitments to date, according to the fund manager’s Canadian private equity firm Onex Corp (TSX: OCX). That puts the firm’s flagship partnership, launched in 2013, within reach of its US$4.5 billion target. Buyouts, a sister publication to peHUB Canada, last month reported that Fund IV is expected to reach its final close by mid-2014. Releasing its full-year financial results, Onex also said that distributions from its private equity funds totaled US$2.9 billion in 2013, which is the second highest year in the firm’s history. Additionally, the private companies of Onex Partners and mid-market platform ONCAP last year generated returns of 34% through combined distributions and realizations.
Onex Reports Full-Year 2013 Results
Toronto, February 21, 2014 – Onex Corporation (“Onex”) (TSX: OCX) today announced its consolidated financial results for the fourth quarter and full year ended December 31, 2013 and an update on matters following year-end.
In June, Onex Partners III acquired the largest operator of tradeshows in the United States, Emerald Expositions (“Emerald”), in a transaction valued at $950 million. In January 2014, Emerald acquired George Little Management, LLC, adding more than 20 leading tradeshows, including the largest show in the New York metropolitan area. The total equity investment for both transactions was $490 million, of which Onex’ share was $119 million.
Distributions during 2013 from our private equity funds, Onex Partners and ONCAP, totalled $2.9 billion – the second highest year in Onex’ history. Onex’ share of distributions was $1.1 billion, including $75 million of carried interest. Realizations included the recapitalization of Carestream Health, the sale of shares of Allison Transmission in secondary offerings, and the sales of RSI Home Products, TMS International, BSN SPORTS and Caliber Collision Centers (“Caliber”). The sale of Caliber is particularly noteworthy as ONCAP II generated returns of 7.5 times the capital invested.
Onex Partners and ONCAP operating companies collectively raised or refinanced a total of $8.9 billion of debt, and paid down debt totalling approximately $1.1 billion in 2013.
Including realizations and distributions, Onex Partners’ and ONCAP’s private companies generated returns for Onex of 34% during 2013. Including our public companies, the value of all operating businesses in the Onex Partners and ONCAP Funds, including realizations and distributions, increased by 35% during 2013.
Including its year-end cash and near-cash equivalents balance of $1.7 billion, Onex’ proprietary capital grew last year to $5.8 billion, representing a 23% increase on a per-share basis to $50.93 (C$54.16).
Onex Credit Partners completed two collateralized loan obligation (“CLO”) offerings, raising more than $1.0 billion, including $64 million from Onex, and has established a warehouse facility for a fifth CLO.
In 2013, Onex launched the fundraising for Onex Partners IV, and to date has raised a total of $3.7 billion in aggregate commitments towards its $4.5 billion target, including Onex’ $1.2 billion commitment.
Building our Businesses
“We had some very gratifying realizations in 2013,” said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. “In particular, investors recognized the great job done at Carestream Health in growing its digital imaging business and maintaining tight control throughout. As well, Caliber’s aggressive acquisition and integration strategy really paid off for investors. Looking forward, with $1.7 billion in cash and near-cash equivalents and $3.4 billion in committed, undrawn capital, we will be aggressively looking for more businesses to buy and build in 2014.”
By transforming good businesses into industry leaders, Onex has generated a 29-year gross IRR of 28% and a multiple of 3.0 times invested capital from realized, substantially realized and publicly traded investments.
In addition to the firm’s commitment to every business, the Onex management team continues to be heavily invested in everything Onex owns. At December 31, 2013, the value of the team’s investment in our businesses and Onex shares was approximately $1.7 billion.
Managing and Growing Other Investors’ Capital
Onex earns recurring management fees and/or carried interest on $12.0 billion of capital managed for limited partners and other investors. In 2013, combined management fees and carried interest received offset ongoing operating expenses.
Onex officially launched fundraising of Onex Partners IV in 2013, targeting a fund size of $4.5 billion in total capital commitments. To date, Onex has raised $3.7 billion in aggregate commitments, including Onex’ $1.2 billion commitment, and expects to complete fundraising in 2014. This new fund will contribute to Onex’ stream of annual management fees and the potential to earn carried interest on invested limited partner capital. Onex’ limited partnership agreements typically have a 10-year term and provide predictable management fees from assets under management. Although fees for Onex Partners III decreased to 1% of invested capital effective December 2013, the end of its original five-year commitment period, we expect to start drawing management fees for Onex Partners IV sometime in 2014.
At December 31, 2013, the value of Onex’ unrealized carried interest was approximately $54 million based on the traded market values of Onex Partners’ public companies and a further $148 million based on the year-end valuations of the private businesses. These year-end values reflect a $137 million increase in the value of Onex’ carried interest including the impact of $75 million of realized carried interest received during the year. The amount of carried interest ultimately realized by Onex depends on the overall performance of each Fund.
We continue to see growth in Onex Credit Partners. During 2013, two CLO offerings totalling more than $1.0 billion closed, bringing Onex Credit Partners’ year-end assets under management to $3.3 billion – a 44% increase over the prior year. As this investing platform continues to grow, so too will the recurring management fees, creating additional value for Onex shareholders.
Creating Value for Shareholders
Onex’ long-term goal is to grow its capital per share on average by at least 15% per annum. For the twelve months ended December 31, 2013, Onex’ proprietary capital per share grew by 23% to $50.93 (C$54.16).
Our goal is to have the value of Onex’ shares reflect both the growth in the value of our assets and the intrinsic value of our asset management capabilities. At December 31, 2013, Onex’ Subordinate Voting Shares (“SVS”) closed at C$57.35, a 37% increase from December 31, 2012. This compares to a 30% increase in the S&P 500 and a 10% increase in the S&P/TSX Composite Index.
The Company paid a fourth-quarter dividend of C$0.0375 per SVS on January 31, 2014 to shareholders of record on January 10, 2014.
In 2013, Onex repurchased 3,060,400 SVS for a total cost of $153 million or an average cost per share of C$51.81. In January 2014, Onex repurchased 397,200 SVS for a total cost of $21 million or an average cost per share of C$57.01. Over the last 17 years, Onex has repurchased more than 80 million SVS for a total cost of approximately C$1.4 billion.
Onex’ quarterly and full-year consolidated financial results do not 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.
On a consolidated basis for the fourth quarter, revenues increased 10% to $7.0 billion compared to the same period of the prior year. Onex reported a consolidated net loss of $223 million compared to a loss of $83 million in the fourth quarter of 2012.
On a consolidated basis for the full year ended December 31, 2013, revenues increased 12% to $27.8 billion consistent with the change in the quarter. The net loss for the year was $813 million compared to net earnings of $16 million for the year prior. This change was primarily driven by a greater increase in the fair value of the limited partners’ interest in our operating businesses that is recorded as a liability, which resulted in approximately $750 million in increased charges to Onex’ consolidated net earnings. In addition, the aerostructures segment reported a loss primarily as a result of forward-loss charges on long-term contracts.
Attached are the Consolidated Balance Sheets, Statements of Earnings, Statements of Cash Flows and information by industry segment for the full year ended December 31, 2013 and 2012 as prepared under International Financial Reporting Standards. The complete financial statements, including Management’s Discussion and Analysis of the results, are posted on Onex’ website, www.onex.com, and are also available on SEDAR at www.sedar.com. Also attached are the “How We Are Invested” schedule, which details Onex’ $5.8 billion of proprietary capital and provides public and private company performance information, and the Schedule of Fees and Expenses.
Onex management will host a conference call to review Onex’ fiscal 2013 results on Friday, February 21 at 11:00 a.m. ET. A live webcast of this conference call will be available in listen-only mode on its website, www.onex.com.
With offices in Toronto, New York and London, Onex is one of the oldest and most successful private equity firms. Onex acquires and builds high-quality businesses in partnership with talented management teams. The Company has approximately $19 billion of assets under management, including $6 billion of Onex capital, in private equity, credit securities and real estate. Onex invests its capital directly and as the largest limited partner in each of its Funds.
Onex’ businesses have assets of $44 billion, generate annual revenues of $33 billion and employ approximately 232,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX. For more information on Onex, visit its website at www.onex.com. The Company’s security filings can also be accessed at www.sedar.com.
This news release may contain forward-looking statements that are based on management’s current expectations and are subject to known and unknown uncertainties and risks, which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements. Onex is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.
For further information:
Vice President, Investor Relations
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