TORONTO – Onex Corp. (TSX:OCX) says it’s well-positioned to make new acquisitions as part of a long-term buy-and-sell strategy.
“We have never been in a better position to acquire world-class businesses,” chairman and chief executive Gerry Schwartz said Wednesday as the private equity company reported its second-quarter earnings.
At the end of June, Onex had $2 billion of cash — up $200 million from the end of March. Since the second quarter ended, Onex has generated a further $1 billion of cash from sales of several assets.
The Toronto-based company has also recently agreed to acquire York Risk Services Group, a U.S.-based provider of property, casualty and workers compensation insurance, in a deal valued at $1.35 billion.
The Toronto-based company had $39 million of net income in the second quarter, including $447 million of net earnings from discontinued operations such as Wichita-based Spirit AeroSystems, which Onex has divested in stages.
Onex said its second-quarter results included a gain of $310 million recognized on the partial sale of Spirit AeroSystems in June. The gain doesn’t include proceeds from the sale of its last remaining Spirit shares. Onex said Aug. 7 that its portion of the 2005 investment in Spirit was US$108 million and it has received a total of US$975 million in proceeds over the nine years since.
Onex’s continuing operations — which have invested in numerous companies in various industries including manufacturing, insurance, health-care and real estate — lost $408 million in the three months ended June 30. A year earlier, Onex lost $718 million, including $93 million from discontinued operations and $625 million from continuing operations.
Its revenues were largely unchanged compared with the same period last year at $5.2 billion.
“As we have indicated before, our consolidated financial results will be lumpy as we acquire, build, and subsequently realize on the businesses we own,” Onex chief financial officer Donald Lewtas told analysts in a conference call Wednesday.
Among the recent sales was the company’s stake in Gates Corporation, acquired in 2010 when Onex and the CPP Investment Board bought U.K.-based industrial holding company Tomkins, and The Warranty Group, a U.S.-based multinational provider of extended warranties that Onex and its partners acquired in 2006.
Onex has set itself two main long-term goals: grow its capital per share by 15 per cent a year and grow its fee-generating capital by 10 per cent per year. The capital per share reflects the underlying value of its assets and the fees are collected for managing assets on behalf of its partners, which include large institutional investors.
For the 12 months ended June 30, its capital per share grew by 16 per cent to $56.26 and its fee-generating assets grew by 57 per cent to $14.8 billion.
“We continue to believe we’re better positioned than ever for continued growth. . . . Our investments are performing well and we have the financial resources to take action,” Onex senior managing partner Bobby Le Blanc told analysts.
Since the quarter ended, Onex has announced the planned acquisition of York Risk Services, which provides property, casualty and workers’ compensation insurance to more than 6,300 clients in the United States. Le Blanc told analysts that Onex is looking at whether there’s an opportunity for York Risk to work with USI Insurance Services, acquired in 2012.
“I think there will be some benefits. I don’t expect them to be meaningful, but I would expect them to be able to help each other out during our ownership periods,” Le Blanc said.