Author Topic: ONEX - Private Equity  (Read 627 times)


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ONEX - Private Equity
« on: November 22, 2020, 06:32:06 AM »
Didn't see a thread on this; so started one.

Onex is a Canadian private equity founded by Gerry Schawrtz, who was a one-time employee at Bear Stearns, before coming back to Canada. You dont hear much about Onex, given that most of its investment are not household names. But when do they make news it is usually in the aerospace business, as it did when they bought West Jet back in 2019.

One might think of them as naive for getting into aerospace, but they do have a good record. Onex was responsible to curve out the aerostructure business out of Boeing, now better known as Spirit Aerosystems. It was a multifold gain for Onex.

"The $375 million investment from the Onex Partners I Group generated $3.2 billion of total value, resulting in an 8.5 times gross multiple of capital invested and 200.9% gross IRR."

Another name, they did well was Skychef. While they didnt do too well with the purchase of Beechcraft from Raytheon. So, yes, they bought West Jet on the top of what is known in hindsight to be the top of market, but they got more going for them. In any case, while West Jet's enterprise value was around $5 billion, Onex equity that was put at risk for that deal was a mere $345 million. Nonthesless suffice to say, i think Onex Partners V wont have a great return given when they bought West Jet, but that is the nature of the business.

2019 results:

net gain of $836 million             -- shareholder capital stood at $7.2 billion (or $90.2 CAD per share)

2020 results:

Q1: net loss of $1.1 billion         -- shareholder capital stood at $5.9 billion (or $85.2 CAD per share)
Q2: net gain of $0.689 billion     -- shareholder capital stood at $6.5 billion (or $91.4 CAD per share)
Q3: net gain of $0.515 billion     -- shareholder capital stood at $6.7 billion (or $98.7 CAD per share)

why now ?

In Dec 2019, (pre-covid), Onex shareholder capital stood at $7.2 billion or $90 CAD per share.
In Sept 2020, (post-covid), Onex shareholder capital stood at $6.7 billion or $98 CAD per share.

So the absolute dollar value of shareholder equity has shrunk, but the equity value per share has increased as the company plowed a record $444 million into share buyback this current 2020 year. For context, total buyback since 1997 stood at $2.3 billion. Fully 9.7 million shares have been pulled out of circulation in one year. That equals five year worth of buyback from 2015-19. 

Share price currently stands at $68 CAD. I have personally started a 1/4 position on it, hoping that it goes down from here.

Tidbits from Q2 earning calls:

"Overall, the allocation of Onex's capital has remained fairly stable this year with cash and near cash now standing at nearly $2 billion or 32% of hard NAV. Although we haven't made any particularly large investments, our strong balance sheet has allowed us to commit to a handful of attractive PE investments post-COVID, and more importantly remain on the hunt for more."

"Although, I believe there is meaningful value associated with our asset and wealth management platforms, given where our stock has been trading, I only need to look at Onex as investing capital or hard NAV to get comfortable with buying back our stock. At quarter end marks, Onex's investing capital per share was CAD84.63. However, I'd like to go one step further and adjust for the cash and publicly traded investments within our NAV. At quarter end, these assets alone represented over CAD43 per share. Assuming nobody will argue about the value of these assets, when we can buy back our stock at around CAD58, we're effectively buying in the rest of our investing assets about CAD42 per share of private PE investments and credit investments at an implied discount of about 60%. So as you can imagine, I'm pretty happy Onex has purchased almost 4.5 million shares through the end of July. At an average cost of CAD57.94 per share. These repurchases effectively created, about CAD120 million of NAV for our continuing shareholders."

« Last Edit: November 22, 2020, 01:07:12 PM by Xerxes »