OREANDA-NEWS. May 12, 2012. Onex Corporation ("Onex") (TSX: OCX) today announced its consolidated financial results for the first quarter ended March 31, 2012 and an update on matters following quarter-end.

Highlights

Allison Transmission completed a USD 690 million initial public offering representing a multiple of approximately 2.6 times invested capital. 

Including realizations and distributions, the value of Onex’ interest in Onex Partners’ and ONCAP’s private companies, including Allison Transmission, grew by 11% and 5%, respectively, during the first quarter of 2012. 

Onex’ proprietary capital per share grew by 7% during the quarter to USD 39.28. 
At March 31, Onex’ unrealized carried interest was USD 119 million based on the public companies at traded market value and quarter-end fair market valuations of the private companies. 

Onex Credit Partners completed its first collateralized loan obligation (“CLO”) offering, raising USD 320 million including USD 38 million from Onex. 

In the four months ended April 30, Onex repurchased 147,900 shares for approximately CAD 5 million at an average cost per share of CAD 35.81. 

At April 30, Onex had no debt at the parent company and approximately USD 1.4 billion of cash and near-cash investments.

Onex is an investor and asset manager generating value from (i) growth in the Company’s USD 4.8 billion of proprietary capital; (ii) management fees associated with USD 8.5 billion of third-party assets under management; and (iii) a carried interest based on the performance of third-party invested capital.

Building Our Businesses

 “The first quarter of the year was an active one for Onex,” said Gerald W. Schwartz, Chairman and Chief Executive Officer of Onex. “Allison Transmission completed a USD 690 million initial public offering, the largest for an industrial company since 2010, Onex Credit Partners created its first collateralized loan obligation and our operating companies raised or refinanced a total of USD 1.1 billion of debt.”

 In March, Onex Partners II and certain co-investors sold approximately 15 million shares in the IPO of Allison Transmission (NYSE: ALSN) for net proceeds of USD 326 million, of which Onex’ share was USD 102 million. The multiple of invested capital was approximately 2.6 times. Onex continues to hold 23.4 million shares of the company.

 In the first quarter, a number of Onex’ operating companies paid down approximately USD 340 million of debt. As well, several of our businesses took advantage of refinancing opportunities given the stronger credit markets, reducing interest expenses, extending maturities and improving terms.

 The value of Onex’ interest in Onex Partners’ and ONCAP’s private companies, including Allison Transmission, grew by 11% and 5%, respectively, during the first quarter of 2012. These returns include realizations and distributions and are based on the valuations reported to our Limited Partners. Overall, Onex’ proprietary capital per share grew by 7% during the quarter and by 8% over the 12 months ended March 31.

 “As merger and acquisition activity continues to be sporadic, originating new investment opportunities remains our greatest challenge,” said Mr. Schwartz. “While it’s encouraging to have an investment pipeline today that is stronger than it’s been at any time since the financial crisis, we always stay focused on businesses that can be grown and improved under our ownership.”

 Although it is difficult to predict investment pace, Onex is well-positioned to respond to attractive investment opportunities. The parent company continues to be in excellent financial condition, with approximately USD 1.4 billion in cash and near-cash investments at the end of April, no debt and approximately USD 2.5 billion of uncalled committed third-party capital for acquisitions through Onex Partners III and ONCAP III.

 In light of its considerable cash position, Onex increased its percentage commitment to Onex Partners III to approximately 25% from 18%. The increased commitment was announced in November 2011 and will apply to new Onex Partners III investments completed after May 14, 2012.

 In addition to investing its capital, Onex uses its cash to repurchase shares under its Normal Course Issuer Bid when the shares are trading at prices that reflect a discount to Onex’ view of value. In the first four months of 2012, Onex repurchased 147,900 shares for approximately CAD 5 million at an average price of CAD 35.81 per share. In the 12 months ended April 30, Onex repurchased 3,313,196 shares for approximately CAD 111 million at an average price of CAD 33.39 per share.

 Since inception, Onex has established a strong culture that is based on long-held investing principles. The Company believes that long-term value is best created by enhancing the productivity and profitability of its businesses. By transforming under-valued businesses into industry leaders, Onex has generated a 28-year gross IRR of 29% and an average multiple of 3.3 times invested capital from realized, substantially realized and publicly traded investments.

 Onex also believes that its success is furthered through strong alignment of interests between Onex shareholders, its limited partners and the management team. At March 31, 2012, the value of the team’s investment in Onex’ shares and its businesses was approximately USD 1.5 billion.

Asset Management
The management of third-party capital provides Onex with a predictable stream of annual management fees that substantially offsets ongoing operating expenses. Today, Onex earns recurring asset management fees and/or carried interest on USD 8.5 billion of third-party capital. In 2011, Onex’ private equity and credit investing platforms generated USD 110 million in management fees and Onex received USD 72 million in carried interest and performance fees substantially as a result of realizations.

 At March 31, 2012, Onex had approximately USD 56 million of unrealized carried interest on Onex Partners’ public companies and a further USD 63 million based on the quarter-end valuations of the private businesses. The actual amount of carried interest realized by Onex depends on the ultimate performance of each Fund.

 Following the Allison Transmission IPO, Onex and the management team elected not to receive the USD 17 million of carried interest to which they were otherwise entitled. This decision reflected the significantly reduced value of our interest in Hawker Beechcraft and a desire to avoid the possibility of future claw-back of carry paid.

 In March, Onex Credit Partners established its first CLO, raising USD 320 million and increasing third-party capital under management by USD 283 million to USD 1.4 billion. This new CLO platform creates another channel of distribution for credit products. If market conditions permit, issuing subsequent CLOs off the same platform could be an additional source of recurring management fee income to Onex.

Consolidated First-Quarter Results
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 first quarter, revenues increased 21% to USD 6.8 billion compared to the same period of the prior year. The acquisitions completed in 2011, including JELD-WEN, contributed to this year-over-year revenue increase. Onex reported consolidated net earnings of USD 179 million compared to a net loss of USD 205 million in the first quarter of 2011. The year-over-year increase in net earnings was largely a result of the gain on the shares sold in the initial public offering of Allison Transmission and the increase in fair value of the shares that are still held. Cash from operations was USD 263 million in the first quarter of 2012 compared to USD 41 million in 2011.

 The Company paid a first-quarter dividend of CAD 0.0275 per Subordinate Voting Share on April 30, 2012 to shareholders of record on April 13, 2012.

 Attached are the Unaudited Interim Consolidated Balance Sheets, Statements of Earnings, Statements of Cash Flows and information by industry segment for the quarter ended March 31, 2012 and 2011 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 is the “How We Are Invested” schedule, which details Onex’ USD 4.8 billion of proprietary capital and provides private company performance information.