Onex Corporation · TSX:ONEX
Onex — Investor Day (June 2015)
67 slides from Onex's investor day presentation, Jun 4, 2015
Slide 1: Onex Investor Day June 4, 2015
ONEX INVESTOR DAY JUNE 4, 2015
Slide 2: Safe Harbour
Safe Harbour This presentation contains forward-looking statements related to our future growth, trends in our operating companies’ businesses and industries and our financial and operational results and performance that are based on current expectations, forecasts and assumptions involving risks an
Slide 3: Agenda
Agenda Welcome Gerry Schwartz Chairman and Chief Executive Officer A Year in Review Emilie Blouin Director, Investor Relations Extending the Brand Emma Thompson Managing Director – Investor Relations Credit Michael Gelblat Chief Executive Officer, Credit Private Equity Tawfiq Popatia Managing Direct
Slide 4: Welcome
Welcome Gerry Schwartz Chairman and Chief Executive Officer
Slide 5: A Year in Review
A Year in Review Emilie Blouin Director, Investor Relations
Slide 6: 30+ Years of Successful Investing
30+ Years of Successful Investing Private Equity Credit Onex: $4.3B AUM(1) Onex: $760MM AUM(1) Other Investors: $10.9B AUM Other Investors: $5.0B AUM(1) Onex Partners ONCAP Collateralized Hedge Loan Mid-Market Funds Large Obligations Transactions Transactions Strong Alignment of Interests All amount
Slide 7: A Year in Review
A Year in Review $1.9 billion $2.8 billion $1.3 billion 3.7 million Realized Invested Raised Shares Repurchased Reflects completed and pending transactions announced post 2014 Investor Day through June 1, 2015. INVESTOR DAY 2015 2
Slide 8: Leveraging Our Success
Leveraging Our Success Grow Onex Capital Per Share by 15% Annually Onex $5.9B Others $15.9B(1) Grow Fee-Generating Assets by 10% Annually (1) Pro forma to include CLO-8 completed April 30, 2015. INVESTOR DAY 2015 3
Slide 9: Our Performance
Our Performance LTM 5-Year Q1 2015 2014 2013 2012 2011 2010 CAGR(1) NAV per Share (US$) 4% 6% 23% 12% 8% 17% 12% Fee-Generating AUM (US$) (1%) 13% 36% 10% (9%) 16% 12% OCX Share Price (C$) 20% 18% 37% 26% 10% 28% 21% S&P TSX Composite (C$) 4% 7% 10% 4% (11%) 14% 4% OCX Share Price (US$) 5% 8% 28% 29
Slide 10: A Year in Review
A Year in Review Emilie Blouin Director, Investor Relations
Slide 11: Extending the Brand
Extending the Brand Emma Thompson Managing Director – Investor Relations
Slide 12: Fee-Generating AUM
Fee-Generating AUM $14.3B $13.5B $12.0B $8.7B $8.8B $8.0B (1) 2010 2011 2012 2013 2014 2015 YTD Private Equity Credit (1) Pro forma to include CLO-8 completed April 30, 2015. INVESTOR DAY 2015 1
Slide 13: Credit: Platform for Growth
Credit: Platform for Growth Assets Under Management $5.8B $5.0B 41% CAGR(2) $3.3B $2.3B $1.5B $1.3B 2010 2011 2012 2013 2014 YTD 2015(1) Other Strategies CLOs (1) Pro forma to include CLO-8 completed April 30, 2015. (2) CAGR reflects Q4 2010 to May 31, 2015. INVESTOR DAY 2015 2
Slide 14: Credit: State of the Fundraising Market
Credit: State of the Fundraising Market Target Hedge Fund Allocation as a Percent of Total Assets 19% 19% 19% 18% 17% 17% 11% 9% 8% 7% 7% 7% Endowment Family Office Foundation Private Sector Public Pension Sovereign Plan Pension Fund Fund Wealth Fund 2012 2014 Source: Preqin. Allocations to hedge fu
Slide 15: Market Opportunity
Market Opportunity Alternative AUM Concentration by Top 5 Managers(1) $1.8T $1.9T $1.9T $0.6T $0.2T $0.6T $2.1T $2.6T 76% 60% 50% 32% 27% 16% 9% 8% ETFs Large-Cap U.S Taxable U.S Retail Infra- Real Private Hedge Domestic Fixed Alts (4) structure Estate(5) Equity Funds Equities(2) (3) Income Top 5 Ma
Slide 16: Our Brand
Our Brand Performance Stable, Alignment of Experienced Interests Team Long-Term Well-defined Track Record Strategy INVESTOR DAY 2015 5
Slide 17: Fundraising Success
Fundraising Success Total Private Equity Fee-Generating Capital Raised $11.8B $7.8B $7.3B $3.8B $1.5B $0.3B 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Each Fund’s capital raised is reflected in year of final close. INVESTOR DAY 2015 6
Slide 18: Long-Term Institutional Investors
Long-Term Institutional Investors By Type By Geography RoW 11% Pensions 52% Banks & Canada U.S. Insurance 21% 50% 17% FoF & Europe Asset SWFs 18% Managers 18% 10% Endowments & HNWI 3% Reflects Onex’ Limited Partners in Onex’ private equity Funds. INVESTOR DAY 2015 7
Slide 19: Integrated Marketing Effort
Integrated Marketing Effort Fundraising and Investor Relations Onex ONCAP Credit Partners INVESTOR DAY 2015 8
Slide 20: Q&A Emma Thompson
Q&A Emma Thompson Managing Director – Investor Relations
Slide 21: Credit
Credit Michael Gelblat Chief Executive Officer
Slide 22: A Brief Overview
A Brief Overview Credit Manages $6+ Billion in AUM 13 Experienced Investment Professionals, Average of 21 Years of Experience Strong Alignment of Interests, Onex Management ~$290 Million Invested Well-Recognized Brand And Scalable Business Credit leverages the strong Onex brand and generates signifi
Slide 23: AUM Breakdown
AUM Breakdown ● With the closing of CLO-9, Credit will manage over $6 billion in AUM across a variety of different strategies US$ Collateralized Loan $6.2 Billion $4.9B Obligations $500MM Debt Opportunities $415MM Senior Floating $400MM Senior Credit $15MM High-Yield Credit (ETF) INVESTOR DAY 2015 2
Slide 24: AUM Growth
AUM Growth Assets Under Management $6.2B 44% CAGR(1) $5.0B $3.3B $2.3B $1.3B $1.5B 2010 2011 2012 2013 2014 YTD 2015 Credit continues to be instrumental in achieving our goal: Grow fee-generating AUM by 10% annually (1) CAGR reflects Q4 2010 to May 31, 2015. INVESTOR DAY 2015 3
Slide 25: Recurring Fee Income Growth
Recurring Fee Income Growth Management Fees ~$34MM 30% CAGR(1) $28MM $22MM $17MM $15MM $9MM 2010 2011 2012 2013 2014 2015E (1) CAGR reflects Q4 2010 to Q4 2015. INVESTOR DAY 2015 4
Slide 26: Opportunity: Right Place at Right Time
Opportunity: Right Place at Right Time 100% 80% CLOs 60% 40% 20% Banks 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1Q15 CLOs Banks Other ● Banks have continued to reduce exposure to institutional loans, paving way for other market participants ● European and U.S. risk retenti
Slide 27: Expected Life Cycle of CLO-1
Expected Life Cycle of CLO-1 108% 108% Millions $50 105% 104% 103% 102% 100% $40 95% 95% 93% 92% 92% $30 90% $20 85% 83% $10 75% $0 2012 2013 2014 2015 MV of Equity Cumulative Cashflows Cashflows Outflows Inflows Mar 2012 Equity Over four years, CLO-1 distributes ($32.2MM) $19+ million in cumulative
Slide 28: A Platform We Can Leverage and Grow
A Platform We Can Leverage and Grow Nearly 80% of the borrowers we own are held in four or more Par Funds 100% 94% 87% 78% Number of Borrowers 67% 60% 49% 40% 31% 22% 10+ 9+ 8+ 7+ 6+ 5+ 4+ 3+ 2+ 1+ Number of Par Funds Credit investing is repeatable and scalable: we selectively choose borrowers, allo
Slide 29: The Future
The Future ● Credit has the tools to successfully navigate the credit investing environment Leveragable platform allowing for Strong management product-line extension and team with deep new investment strategies experience Lots of runway for future growth Repeatable, scalable investment process Redu
Slide 30: Q&A Michael Gelblat
Q&A Michael Gelblat Chief Executive Officer
Slide 31: Endnote for Slide 6
Endnote for Slide 6 (1) Slide 3 projects expected outflows, inflows and returns attributable to equity invested in CLO-1, assuming that (a) a single investor made the entire equity investment, (b) CLO-1 is called for redemption in June 2015 and (c) payments on account of equity are substantially com
Slide 32: Private Equity
Private Equity Tawfiq Popatia Managing Director
Slide 33: Private Equity
Private Equity ● Market backdrop – Capital is abundant – Valuations are high – Competition for investment opportunities is intense – Private equity still a net seller in robust global M&A environment ● How can Onex be productive and thrive in this environment? ● Controlling the outcome – a current e
Slide 34: High Performers Attracting Capital
High Performers Attracting Capital Global Private Equity Fundraising ($ billions) 665 685 571 543 529 389 362 343 319 296 217 173 137 105 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Preqin, Bloomberg, Morgan Stanley Research estimates. 2014 is an estimate. INVESTOR
Slide 35: Permissive Leverage
Permissive Leverage Average Debt Multiples of Large Corporate LBO Loans 6.2x 5.8x 5.3x 5.4x 5.2x 5.3x 5.4x 4.8x 4.9x 4.7x 4.0x Onex Partners Average 3.7x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: S&P Capital IQ Leverage Buyout Review - 4Q14. Defined as issuers with EBITDA of mor
Slide 36: Valuations are High
Valuations are High LBO Purchase Price Multiple and Equity Contribution 9.8x 9.5x 9.7x 9.1x 8.9x 8.6x 8.8x 8.5x 8.2x 7.9x Onex 7.4x Partners Average 7.3x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: S&P Capital IQ Leverage Buyout Review - 4Q14. Total Sources/Adjusted Pro Forma Trai
Slide 37: Competition is Intense
Competition is Intense Global Private Equity Buyout Dry Powder ($ billions) 482 481 438 422 431 388 399 379 353 258 185 176 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Preqin. INVESTOR DAY 2015 5
Slide 38: Private Equity Still a Net Seller
Private Equity Still a Net Seller… Value of Global Buyout-Backed Exits ($ billions) 456 354 273 274 252 254 232 239 170 150 82 68 40 37 52 44 65 5 15 14 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Dealogic. INVESTOR DAY 2015 6
Slide 39: …and a More Disciplined Originator
…and a More Disciplined Originator Global Buyout Deal Value ($ billions) 687 673 293 247 256 252 189 204 203 199 134 111 98 109 68 77 53 65 31 31 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Dealogic. INVESTOR DAY 2015 7
Slide 40: 30+ Years of Market Backdrops
30+ Years of Market Backdrops 3.0x multiple of capital invested; 28% IRR(1) $15 billion of AUM; $4 billion of Onex capital(2) 60+ person dedicated team of investment professionals Clear and proven strategy Healthy diversified portfolio (1) Gross figures based on all Onex realized, substantially real
Slide 41: Outperformance
Outperformance 28% 18% 11% 9% 8% Onex (1) Private Equity (2) Real Estate (3) S&P 500 (4) High Yield (5) Onex has outperformed the market over the long term (1) 30-year track record (gross IRR) associated with Onex Corporation’s realized, substantially realized and publicly traded private equity inve
Slide 42: Same Formula Across Market Environments
Same Formula Across Market Environments ● Market leaders ● Controllable outcomes ● Unlevered free cash flow Cost reductions and Platforms for add-on Corporate operational restructurings acquisitions carve-outs Above examples represent selected investments of the Onex Partners and ONCAP Funds which h
Slide 43: Insight Trumps Market Conditions
Insight Trumps Market Conditions Packaging Commercial Aerospace INVESTOR DAY 2015 11
Slide 44: Case Study: AIT
Case Study: AIT ● Market leader – Leading provider of factory integration, automation, and tooling to aerospace industry – Critical equipment and services generating high ROI for customers by removing recurring touch labor and reducing cycle times – Operates in market with high-entry barriers and be
Slide 45: Three Market-Independent Levers to Create Value
Three Market-Independent Levers to Create Value Diversify Grow Increase Increase Customer Revenue Stability Visibility Base 1 Win new customers in Europe 2 Expand in defense market 3 Grow nascent parts business Multiple expansion is an outcome, not a lever INVESTOR DAY 2015 13
Slide 46: The Market & Onex
The Market & Onex ● Market backdrop is just that – a backdrop ● Onex formula consistent and repeatable across market conditions ● Originate where we have an edge ● Outperformance within an outperforming asset class INVESTOR DAY 2015 14
Slide 47: Q&A Tawfiq Popatia
Q&A Tawfiq Popatia Managing Director
Slide 48: Onex – Hidden Value
Onex – Hidden Value Chris Govan Chief Financial Officer
Slide 49: Onex: Discount/Premium to Hard NAV
Onex: Discount/Premium to Hard NAV 15 How Investor Schedule of Fees We are Day 2010 and Expenses 10 Invested (SOFE) (HWAI) 5 Feb 2012 June 2010 - Feb 2009 June 2, 2015 (5) (10) (15) Average Discount/Premium(1) (1) Reflects the average dollar amount by which the Company’s shares traded over or under
Slide 50: Onex: Hidden Value
Onex: Hidden Value Onex Fees & Carry Fees & Carry Onex Capital Manager Fees & Carry $13.6B $5.9B third- party capital INVESTOR DAY 2015 2
Slide 51: Onex Capital
Onex Capital C$65.54(1) $1.79 $2.11 $2.49 $1.30 ● Rigorous quarterly valuation process $2.09 $1.58 for Private Equity capital ●$27.80 Track record of realizations at or $26.17 above mark ● Scarcity: Onex Partners and ONCAP were oversubscribed $16.45 Q1-2015 Cash and Near-Cash(2) Credit(4) Private Eq
Slide 52: Secondary PE Market: Volumes
Secondary PE Market: Volumes ($ in billions) $45 $42 $40 $35 $30 $28 $25 $25 $25 $20 $20 $20 $15 $15 $12 $12 $10 $7 $8 $5 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Preqin, Cogent.Partners. Information is as of December 2014. INVESTOR DAY 2015 4
Slide 53: Secondary PE Market: Pricing
Secondary PE Market: Pricing 100% 109% 109% 109% 98% 94% 91% 89% 86% 75% 84% 73% 50% 59% 25% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LBO secondary pricing levels average 90% since 2010 Source: Preqin, Cogent Partners. Information is as published in June 2014, using NAV as of Decemb
Slide 54: Secondary PE Market: Pricing
Secondary PE Market: Pricing Vintage 2002-2005 2006-2009 2010-2013 Top 50 U.S. LBO Funds 92% 98% 107% All U.S. LBO Funds 86% 92% 93% ● Average pricing includes inopportune selling – Regulatory changes – “Zombie Funds”: “stagnant-GP” fund restructuring – 25% of sellers cite poor performance Source: P
Slide 55: Secondary Market: Implied Onex Value
Secondary Market: Implied Onex Value Vintage 2002-2005 2006-2009 2010-2013 Total Top 50 U.S. LBO Funds 92% 98% 107% Onex PE Capital 388 394 2,177 2,959 Implied Value 357 386 2,329 3,072 104% Premium for capital subject to full fees Source: Preqin, Cogent Partners, Setter Capital. Top 50 U.S. LBO Fun
Slide 56: Onex Capital
Onex Capital C$65.54(1) ● Rigorous quarterly valuation process ● Track record of realizations at or above mark ● Scarcity: Onex Partners and ONCAP were oversubscribed ● Secondary market pricing Q1-2015 Cash and Near-Cash(2) Credit(4) Private Equity(3) Other Investments(5) Based on Onex’ How We Are I
Slide 57: Onex: Hidden Value C$65.54
Onex: Hidden Value Fees Carry Fees & Carry Onex Onex Capital Manager C$65.54 + ? INVESTOR DAY 2015 9
Slide 58: Pro Forma SOFE
Pro Forma SOFE Run Rate Fees 3-Year 3-Year ($ in millions) 2014 Average Average Private Equity Manager (1)(2) Management Fees $ 71 $ 86 $ 101 (2)(3) Management Fees from Onex Capital 21 25 37 (4) Carried Interest 171 83 83 (5) Carried Interest from Onex Capital 98 62 62 Revenue Items 361 256 283 Com
Slide 59: Historical P/NTM ENI
Historical P/NTM ENI 14.0x 13.0x 12.0x 11.0x 10.0x 9.0x 8.0x 7.0x 6.0x Range: 5.0x 9.4x-11.3x 4.0x Company A Company B Company C Company D Source: Capital IQ. INVESTOR DAY 2015 11
Slide 60: Onex Manager
Onex Manager Low High Target Pro Forma Income $181 $181 NTM P / ENI Multiple 9.4x 11.3x $1,701 $2,045 F/X 1.24 1.24 C$2,111 C$2,537 Fully Diluted Shares 120 120 C$17.63 C$21.17 INVESTOR DAY 2015 12
Slide 61: Onex: Hidden Value
Onex: Hidden Value Fees Carry Fees & Carry Onex Onex Capital Manager C$65.54 + C$17.63 - C$21.17 C$83.17 - C$86.71 INVESTOR DAY 2015 13
Slide 62: Q&A Chris Govan
Q&A Chris Govan Chief Financial Officer
Slide 63: Onex Capital Endnotes
Onex Capital Endnotes (1) Calculated on a fully diluted basis. Fully diluted shares were approximately 119.8 million at March 31, 2015. Fully diluted shares include all outstanding Subordinate Voting Shares and outstanding Stock Options that have met the minimum 25% price appreciation threshold. (2)
Slide 64: Pro Forma SOFE Endnotes
Pro Forma SOFE Endnotes (1) The management fees include those earned in the Onex Partners and ONCAP private equity funds and Onex’ retained portion of the management fees earned from operating companies. No fees are included in respect of Onex Corporation’s capital invested in or committed to Onex P
Slide 65: Appendix: Pro Forma SOFE
Appendix: Pro Forma SOFE Year ended December 31, (USD Millions) 2014 2013 2012 Private Equity Management and Advisory Fees (1)(2) $ 71 $ 90 $ 96 Management and Advisory Fees on Onex Capital (2)(3) 21 26 28 (4) Carried Interest 171 75 3 Carried Interest on Onex Capital (4)(5) 98 88 1 Revenue Items 36
Slide 66: Appendix: Pro Forma SOFE Endnotes
Appendix: Pro Forma SOFE Endnotes (1) The management and advisory fees include those earned in the Onex Partners and ONCAP private equity funds and Onex' retained portion of the management fees earned from operating companies. No fees are included in respect of Onex Corporation's capital invested in
Slide 67: Panel Discussion
Panel Discussion Gerry Schwartz Bobby Le Blanc Seth Mersky Anthony Munk Moderator: Emma Thompson