Onex Corporation · TSX:ONEX
Onex — Investor Day (June 2014)
64 slides from Onex's investor day presentation, Jun 3, 2014
Slide 1: Onex Investor Day
Onex Investor Day June 3, 2014 Toronto, Canada ONEX
Slide 2: Emma Thompson, Head of the Funds Group
Emma Thompson Head of the Funds Group
Slide 3: Forward-looking statements
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 and uncertainti
Slide 4: Agenda
Introduction Emma Thompson Head of the Funds Group Onex Today Donald Lewtas CFO Private Equity Fundraising Emma Thompson Head of the Funds Group Alignment & Team Development Anthony Munk Senior Managing Director Break 10:30 – 10:50 a.m. Investing, Building & Realizing Bobby Le Blanc Senior Managing
Slide 5: Recent highlights
● Realizing $6.7 billion for investors, of which $2.3 billion is Onex’ share(1) ● Acquired Emerald Expositions ● Raised three new CLOs ● Increased NAV per share by 18% ● Active with share buyback ● Increased dividend by 33% ● Completed fundraising for Onex Partners IV All amounts in Onex’ 2014 Inves
Slide 6: Annualized total returns
1 Year 5 Years 37% 26% 21% 16% 16% 15% 15% 7% S&P TSX S&P 500 Private OCX S&P TSX S&P 500 Private OCX Equity Equity 10 Years 20 Years 15% 16% 14% 14% 6% 7% 6% 5% S&P TSX S&P 500 Private OCX S&P TSX S&P 500 Private OCX Equity Equity Annualized total returns through May 28, 2014. Source: Capital IQ. P
Slide 7: Grow Onex' Capital Per Share by 15% Annually
Grow Onex’ Capital Per Share by 15% Annually 5
Slide 8: NAV per share and fee-generating AUM growth
LTM CAGR (Q1-14) 2013 2012 2011 2010 2009 ‘09-’13 NAV per Share +18% +23% +12% +8% +17% +16% 15% Fee-Generating AUM +47% +36% +10% -9% +16% +13% 13% OCX Share Price (C$) +27% +37% +26% +10% +28% +30% 26% S&P TSX Composite +12% +10% +4% -11% +14% +31% 9% S&P 500 +19% +30% +13% +0% +13% +23% 15% 6
Slide 9: Grow Fee-Generating Assets 10% Annually
Grow Onex’ Capital Per Share by 15% Annually Grow Fee-Generating Assets 10% Annually 7
Slide 10: Onex Today, Donald Lewtas
Onex Today Donald Lewtas CFO ONEX
Slide 11: Private Equity and Credit platforms AUM
Private Equity Credit Large Mid-Market Transactions Transactions Onex Credit Partners Onex Partners ONCAP AUM(1)(2): $14.6B $1.3B $4.7B Third-Party(1): $11.8B $0.9B $4.0B Team Size(3): 42 16 12 (1) Adjusted for transactions completed subsequent to March 31, 2014, including the Allison Transmission s
Slide 12: NAV per share composition
$50.64 $1.79 $2.11 $42.81 $2.49 $1.30 $2.09 Unrealized Carried Interest on $1.58 Onex Partners Investments(2) Other Investments(3) $27.80 Onex Credit(4) $26.17 Private Equity(5) Cash and Near-Cash(6) $16.45 $11.67 Q1-2013 Q1-2014 Based on Onex’ How We Are Invested Schedule. Endnotes on slide 10. 2
Slide 13: Pro forma potential uses of cash
Pro Forma Potential Uses of Cash Cash Balance ($MM) ● Largest Limited Partner in each Fund – $1.5 billion in remaining committed capital across PE investment platforms Cash & Near- ● Share buybacks = $1,781 Cash Balance at Q1-14 – $370 million of share buybacks over last five years ● Private equity
Slide 14: Revenue and expense items
($ in millions) 2013 2012 2011 Management Fees(1) Base Management Fees Revenue Items Private Equity $ 89 $ 91 $ 95 Credit 22 17 15 Transaction Fees, Net 1 5 – 112 113 110 Carried Interest and Performance Fees Received(2) Private Equity 75 3 65 Credit 6 3 7 81 6 72 Interest and Other Treasury Income
Slide 15: Management fees
($ in millions) $136 $110 $108 $111 $102 $98 $79 $81 $55 2007 2008 2009 2010 2011 2012 2013 Current Pro forma Run-Rate(1)(2) OPIV(2)(3) Private Equity Credit (1) Current run-rate reflects OPIV management fees commencing in December 2014. Management fees for OPIV may be called sooner if management de
Slide 16: Actual and potential performance, OPIV potential carried interest
Actual & Potential Performance OPIV Potential Carried Interest(2) ($ in millions) $459 $306 $231 $248 $25 $174 $153 $46 $172(1) $206 $128 $21 $55 OPI OPII OPIII OPIV OPIV OPIV Vintage 2003 2006 2009 Net MoC 3.0x 2.0x 1.5x 2.0x 2.5x Realized Carried Interest(3) Unrealized Carried Interest at Mar-14 P
Slide 17: Grow Fee-Generating Assets 10% Annually
Grow Onex’ Capital Per Share by 15% Annually Grow Fee-Generating Assets 10% Annually 7
Slide 18: Donald Lewtas, CFO
OcA Donald Lewtas CFO ONEX
Slide 19: Management fee bridge to pro forma OPIV
($ in millions) +$65 +$8 ($42) ($4) ($2) $136 $111 2013 OPIV(1) OCP(2) OPIII(3)(4) OPII(4) OPI(4) Pro forma OPIV (1) Reflects a full year of management fees for OPIV which is determined based on committed capital during the initial fee period. (2) Reflects additional estimated management fees from C
Slide 20: Endnotes
(1) Calculated on a fully diluted basis. Fully diluted shares were approximately 115.5 million at March 31, 2014 (2013 – 124.7 million). Fully diluted shares include all outstanding Subordinate Voting Shares and outstanding Stock Options that have met the minimum 25% price appreciation threshold. (2
Slide 21: Endnotes
(1) The management fees include those earned in the Onex Partners and ONCAP private equity funds, those earned by Onex Credit Partners manager and Onex' retained portion of the management fees from operating companies. (2) Carried interest and performance fees received are on a cash received basis.
Slide 22: Emma Thompson, Head of the Funds Group
Emma Thompson Head of the Funds Group
Slide 23: Record number of funds in the market
Number of North American Funds in the Market and Target Capital Aggregate Target Amount ($B) 977 881 817 747 721 $425 $367 $368 $356 $289 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Number of Funds in the Market Aggregate Target Capital ($B) Source: Preqin. Record number of funds in the market 1
Slide 24: North American private equity fundraising volume
North American Private Equity Fundraising Volume Aggregate Capital Raised ($B) $399 $383 $316 $317 $196 $202 $182 $174 $161 $143 $62 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Preqin. Select fundraises oversubscribed and completed quickly; many others taking 18+ months to close 2
Slide 25: Average time to final close
Average Time Taken for North American Private Equity Buyout Funds to Achieve a Final Close Number of Months 22 18 16 15 15 14 14 13 11 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2014 Source: Preqin. Onex Partners in and out of the market in 10 months; ONCAP in and out of the market in 8 months 3
Slide 26: Allocations to private equity have increased
Target Private Equity Allocation as a Percent of Total Assets 28% 18% 13% 12% 8% 9% 5% 6% 4% 6% 3% 3% Family Endowments Foundations Public Pension Private Sector Insurance Offices Funds Pension Funds Companies 2009 2013 Source: Preqin. Allocations to private equity have increased across the board 4
Slide 27: Sovereign Wealth Funds as investors
% of Capital Committed to Private Equity Funds by Limited Partner Type 2009 2014 SWFs 3% SWFs 12% All Other All Other Investors Investors 97% 88% Source: Dow Jones Private Equity Analyst Sources of Capital Survey. Sovereign Wealth Funds have emerged as meaningful investors; AUM growth of $4 trillion
Slide 28: Investors by limited partner type
By Limited Partner Type Onex Partners III Onex Partners IV Endowments Endowments & HNWI & HNWI 2% 3% SWFs 10% SWFs 18% FoF & Asset Mgrs FoF & Asset 18% Pensions Mgrs 52% Pensions 13% 55% Banks & Banks & Insurance Insurance 18% 10% 6
Slide 29: Investors by geography
By Geography Onex Partners III Onex Partners IV RoW 11% Canada RoW Canada 19% 18% 20% Europe 16% Europe 16% United United States States 54% 46% 7
Slide 30: Fundraising lessons and OPIV features
● Momentum key to a successful fundraise ● Due diligence process significantly more intense ● LPs increasingly more selective ● Growing demand for co-investment opportunities ● OPIV selling features – Stable, experienced team – Consistent strategy – Aligned interests – OPII track record ● OPIV chall
Slide 31: Grow Fee-Generating Assets 10% Annually
Grow Onex’ Capital Per Share by 15% Annually Grow Fee-Generating Assets 10% Annually 9
Slide 32: Emma Thompson, Head of the Funds Group
Emma Thompson Head of the Funds Group
Slide 33: Anthony Munk, Senior Managing Director
Anthony Munk Senior Managing Director
Slide 34: Management investment in Onex Partners funds
● Management have always invested well beyond the minimum commitment required by LPs ● Including management’s 27% fully-diluted interest in Onex, we have approximately 13% committed to OPIV ● 25% of pre-tax carry distributions are re-invested in Onex shares and must be held to retirement Onex Partne
Slide 35: Operating management investment alongside Onex
● Meaningful investment by operating management teams and employees – Senior management required to invest alongside Onex at acquisition – More than $550 million invested in Onex Partners III companies by management and employees(1) – Broad participation by management in equity incentive plans ● We
Slide 36: Aligned focus on growth of invested capital
● Limited partners, shareholders and the Onex team are all focused on the growth of invested capital 11% 46% 79% 80% 79% 89% 54% 21% 20% 21% Onex Firm A Firm B Firm C Firm D NAV (Investments + Cash + Accrued Carry) Management Fee Stream and Implied Carry(1) (1) As implied by the difference between c
Slide 37: AUM mix versus peers
1% 6% 14% 19% 21% 31% 25% 36% 38% 30% 24% 80% 63% 12% Total AUM: $19 Billion(1) Total AUM: $160 Billion Total AUM: $74 Billion Total AUM: $266 Billion 5% 2% 14% 12% 16% 25% 14% 7% 41% 1% 7% 7% 56% 21% 58% 15% 22% 63% 12% Total AUM: $189 Billion Total AUM: $62 Billion Total AUM: $94 Billion Total AUM
Slide 38: Shared financial goals and investment process
● Shared financial goals – Broad carry distribution – Annual carry allocation – Individual cash contribution – Pro rata in all investments ● Comprehensive investment process – Vertical team structure – Full team involvement – Learning an ‘Onex deal’ 5
Slide 39: Grow Fee-Generating Assets 10% Annually
Grow Onex’ Capital Per Share by 15% Annually Grow Fee-Generating Assets 10% Annually 6
Slide 40: Anthony Munk, Senior Managing Director
Anthony Munk Senior Managing Director
Slide 41: Bobby Le Blanc, Senior Managing Director
Bobby Le Blanc Senior Managing Director
Slide 42: Investing, Realizing, Building
Investing Realizing Building 1
Slide 43: North American PE buyout and exit volumes
North American PE Buyout and Exit Volumes (US$ in billions) $455 $422 $333 $329 $297 $282 $246 $182 $178 $156 $124 $122 $128 $87 $85 $91 $72 $51 $53 $49 2006 2007 2008 2009 2010 2011 2012 2013 Q1-2013 Q1-2014 Aggregate Deal Value Aggregate Exit Value 2
Slide 44: We invest in leaders
● We invest in leaders – Onex Partners: Global businesses, world-class core capabilities – ONCAP: Fragmented industries with expansion opportunities ● Controllable outcomes ● Focus on unlevered free cash flow Cost reductions and Platforms for add-on Corporate operational restructuring acquisitions c
Slide 45: Onex Partners and ONCAP investment structure
Onex • Pod structure covering various industries with senior oversight across all Partners 42 investment • Industrials • Building Products • Healthcare professionals • Aerospace & Defense • Packaging • Financial Institutions • Business Services • Consumer • Gaming • Industrial Services • Restaurants
Slide 46: Investment screening funnel
Onex Partners: ~80-100 per year(1) Initial Review ONCAP: ~250 per year(1) Preliminary Diligence Onex Partners: ~25% advance(1) Initial Bid ONCAP: ~10% advance(1) Final Diligence Stage Final Bid Completed Investments Investment (1) Average based on investments reviewed over the last five years (2009-
Slide 47: Active role with operating companies
Multiple Earnings Debt Expansion Growth Paydown and Other Onex Partners 49% 27% 24% ONCAP 64% 17% 19% Active role with operating companies to execute investment thesis over the long-term 6
Slide 48: 2014 will be a record year for realizations
Recent Success in Creating Value Multiple Investment Results Earnings Debt Expansion Growth Paydown and Other MoC IRR TWG 25% 36% 39% 3.1x 18% Tomkins 52% 14% 34% 2.2x 26% 2014 will be a record year for realizations 7
Slide 49: Grow Fee-Generating Assets 10% Annually
Grow Onex’ Capital Per Share by 15% Annually Grow Fee-Generating Assets 10% Annually 8
Slide 50: Bobby Le Blanc, Senior Managing Director
Bobby Le Blanc Senior Managing Director
Slide 51: Onex Credit Partners, Michael Gelblat
Onex Credit Partners Michael Gelblat CEO ONEX
Slide 52: Onex' credit platform
● Onex’ credit platform ● 22-person team with an average of 18 years of industry experience ● Strong alignment of interests ● Stable and growing AUM 1
Slide 53: Build Leveragable Platform
Build Leveragable Platform Grow Assets Under Management to $5 billion by end of 2017 2
Slide 54: Onex Credit Assets Under Management
Onex Credit Assets Under Management $4.7B $3.3B $2.3B $1.5B $1.3B $782MM $350MM $253MM Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Pro forma Mar-14(1) Other Strategies CLOs (1) Includes OCP CLO-6 at ~$1 billion, which is expected to close late June 2014. 3
Slide 55: Onex Credit AUM and fee income
2012 2013 Run Rate (1) Assets Under Management Total $2.3B $3.3B $4.7B As a % of Onex’ AUM 15% 17% 22% Third-Party $1.8B $2.7B $4.0B As a % of Onex’ Third-Party AUM 18% 20% 25% Fee Income Management Fees $17MM $22MM $30MM Incentive Fees(2) 6MM 10MM Expenses (16MM) (19MM) Net Fee Income $7MM $13MM (1
Slide 56: Net capital invested in CLOs
2012 2013 Run Rate (1) Net Capital – Beginning $0 $53MM $110MM Capital Invested 63MM 74MM 126MM Distributions and Sales (10MM) (17MM) (34MM) Net Capital – End $53MM $110MM $202MM CLO Income(2) $6MM $18MM (1) Run Rate represents our estimate for 2014 pro forma for the closing of OCP CLO-6 and assumin
Slide 57: Total Onex Credit income
2012 2013 Run Rate (1) Management Fees $17MM $22MM $30MM Net CLO Capital $53MM $110MM $202MM Net Fee Income $7MM $13MM CLO Income(2) $6MM $18MM Total Onex Credit Income $13MM $31MM Total Onex Credit Income Per $0.11 $0.27 Share (1) Run Rate represents our estimate for 2014 pro forma for the closing
Slide 58: Grow AUM to $10 billion by end of 2017
Grow Assets Under Management to $10 billion by end of 2017 7
Slide 59: Credit growth initiatives
● Continue to leverage success of U.S. CLOs ● Launch European CLO platform this year ● Focus on cross-platform selling ● Expand product offering 8
Slide 60: Run rate 2014 versus 2017 targets
Run Rate Run Rate 2014 (1) 2017 (2) Assets Under Management $4.7B $10B As a % of Onex’ AUM 22% 37% Onex Capital Invested in CLOs $202MM $550-650MM Management Fees $30MM $55-60MM (1) Run Rate 2014 represents our estimate for 2014 pro forma for the closing of OCP CLO-6 and assuming no further asset gr
Slide 61: Goal to grow AUM to $10 billion by end of 2017
Build Leveragable Platform Goal to Grow Assets Under Management to $10 billion by end of 2017 10
Slide 62: Michael Gelblat, CEO
OcA Michael Gelblat CEO ONEX
Slide 63: Seth Mersky, Senior Managing Director
Seth Mersky Senior Managing Director
Slide 64: Panel discussion
Gerry Schwartz Bobby Le Blanc Seth Mersky Anthony Munk Moderator: Emma Thompson