Onex Corporation · TSX:ONEX
Onex — Investor Day (June 2011)
65 slides from Onex's investor day presentation, Jun 1, 2011
Slide 1: Investor Day June 1, 2011
INVESTOR DAY June 1, 2011
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 June 1, 2011 Emma Thompson Introduction Vice President, Investor Relations Donald W. Lewtas Onex Overview CFO Andrew J. Sheiner Predictable Performance Managing Director Private Operating Company Review Onex Team Michael Lay ONCAP Update Managing Partner, ONCAP Seth M. Mersky Onex Valuation M
Slide 4: Onex Overview
Onex Overview Donald W. Lewtas CFO
Slide 5: Onex Overview
Onex Overview Long history of top-quartile performance $15B of AUM Committed annual management fee income stream Meaningful carried interest opportunity enhances returns Financially secure parent with substantial liquidity Strong alignment of interests Experienced management team All amounts in all
Slide 6: Proprietary and Third-Party Capital
Proprietary and Third-Party Capital Proprietary Capital ($4.6B) Third-Party Capital ($10.3B) 70% 90% 3% 3% 3% 10% 21% Private Equity Real Estate (1) Private Equity Credit Securities Credit Securities Cash and Near-Cash (1) Includes approximately $159 million invested in Onex Credit Partners’ unlever
Slide 7: How We Are Invested
How We Are Invested ($ millions) Proprietary Capital Private Equity Onex Partners Private Companies $ 2,071 Public Companies 304 Unrealized Carried Interest on Onex Partners Investments 142 ONCAP 268 Direct Investments Private Companies 251 Public Companies 176 3,212 Alternative Assets Onex Real Est
Slide 8: Third-Party Assets Under Management
Third-Party Assets Under Management ($ billions) $10.0 $10.3 $7.5 $7.0 $3.7 $4.0 $1.5 $1.5 $1.5 $0.3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* * At March 31, 2011 4
Slide 9: Global Limited Partner Relationships
Global Limited Partner Relationships By Geography By Type 9% 11% 15% 10% 51% 59% 13% 28% 2% 2% Pensions Sovereign Wealth United States Europe Banks & Insurance FoF & Asset Managers Asia & Australia Canada Endowments High Net Worth Values based on Limited Partners in Onex Partners III and ONCAP II. 5
Slide 10: Carried Interest Potential
Carried Interest Potential Onex’ Carried Interest Opportunity ($ millions) Invested Uncalled (1) (2) Capital Capital Total 15% $420 $228 $648 20% $560 $336 $896 25% $723 $463 $1,186 29% $871 $580 $1,451 Note: Actual carried interest distributions paid to Onex in respect of third-party ONCAP investor
Slide 11: Profitable Manager 2010
Profitable Manager 2010 ($ millions) (1) Management Fee Income $ 97 Transaction Fee Income 16 Interest Income 12 Normalized Revenues $ 125 (2) Cost of Operations 93 Current Profit $ 32 Carry Earned 0 Profit and Carry $ 32 (1) Includes monitoring fees and net distributable income from Onex Credit Par
Slide 12: Alignment of Interests
Alignment of Interests Onex is the largest LP in every Fund Team has $1.5B invested in Onex shares and in Onex’ subsidiaries 25% of gross carry realizations are invested in Onex shares; must be held to retirement 8
Slide 13: Why Own Onex? Long-Term NAV Per Share Growth Exceeding 15% Per Year
Why Own Onex? Very healthy portfolio of industry-leading businesses Persistent returns over 27 years Compelling business model Strong alignment of interests Long-Term NAV Per Share Growth Exceeding 15% Per Year 9
Slide 14: Predictable Performance
Predictable Performance Andrew J. Sheiner Managing Director
Slide 15: Our Objective: Long-Term NAV Per Share Growth Exceeding 15%
Our Objective Long-Term NAV Per Share Growth Exceeding 15% Per Year 1
Slide 16: Annual NAV Growth Model
Annual NAV Growth Model Gross Current Return on Expected IRR Net IRR(1) Cash(2) NAV Growth 15% 16% 3% 12% 20% 21% 3% 16% 25% 26% 3% 20% 29% 30% 3% 23% 75% 25% Invested In Cash (1) Assumes private equity investments held for five years. (2) Assumes blended return on cash and Onex Credit Partners. 2
Slide 17: Value Creation: The Math
Value Creation: The Math Acquisition Exit MOC TEV $100 $100 Cash Flow A Debt $60 Generation $0 Equity $40 $100 2.5x Cash Flow TEV $100 Generation $200 B + Increased Debt $60 Profitability $0 + Multiple Equity $40 Expansion $200 5.0x 3.6x Over 27 Years 3
Slide 18: Onex Value Creation at Work
Onex Value Creation at Work (1) Performance of Onex Partners and ONCAP Operating Companies 23 23 Positive Change Negative Change 5 5 (2) EBITDA Growth Debt Paydown Strong Growth and Cash Flow Generation (1) Excludes Compagnie Générale de Géophysique. (2) Includes private company distributions. 4
Slide 19: Value Recognition
Value Recognition Onex Partners Acquisition Exit/Current and ONCAP(1) Multiple Multiple 1 4.8x 9.9x 2 5.1x 7.1x 3 5.1x 8.9x 4 5.3x 7.8x 5 5.6x 9.7x 6 6.1x 8.7x 7 6.2x 8.8x 8 6.2x 8.8x 9 6.8x 9.8x 10 6.9x 12.0x 11 6.9x 6.3x 12 7.8x 8.7x 13 8.2x 0.0x 14 8.6x 8.9x Improving Businesses Through Active Ow
Slide 20: Predictable Performance
Predictable Performance Onex Partners (1) MOC Gross IRR and ONCAP 1 8.1x 74% 2 7.8x 201% 3 7.8x 47% 4 5.8x 57% 5 4.2x 35% 6 4.0x 116% 7 3.4x 84% 8 2.9x 36% 9 2.4x 78% 10 2.1x 30% 11 2.0x 22% 12 1.6x 13% 13 1.5x 14% 14 0.0x 0% Average Gross IRR: 58% (1) Realized and publicly traded investments. Exclu
Slide 21: Why Own Onex? Long-Term NAV Per Share Growth Exceeding 15% Per Year
Why Own Onex? Very healthy portfolio of industry-leading businesses Persistent returns over 27 years Compelling business model Strong alignment of interests Long-Term NAV Per Share Growth Exceeding 15% Per Year 7
Slide 22: Private Operating Company Review
Private Operating Company Review Onex Team
Slide 23: Carestream Health
Private Operating Company Review Onex Presenter: John McCoy, Director Carestream Health Rochester, NY Kevin J. Hobert, CEO Acquired: April 2007 Total Investment: $471 million
Slide 24: Carestream Health Operating Performance
Private Operating Company Review Operating Operating Performance Performance Refinanced first and second lien credit facilities with a single $1.85 billion first lien facility Paid $434M of distributions since acquisition ($169M to Onex); represents 92% of total investment Completed second tuck-in a
Slide 25: Carestream Health Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Revenue $2.4B $2.5B LTM EBITDA $435M $468M Net Debt $1.8B $1.9B Net Debt / EBITDA 4.1x 4.1x Cumulative Distributions $434M N/A 3
Slide 26: Hawker Beechcraft
Private Operating Company Review Onex Presenter: David Hirsch, Principal Hawker Beechcraft Wichita, KS Bill Boisture Jr., Chairman and CEO Acquired: March 2007 Total Investment: $537 million
Slide 27: Hawker Beechcraft Operating Performance
Private Operating Company Review Operating Operating Performance Performance First-quarter aircraft deliveries up year-over-year from 50 to 66 Increased backlog in first quarter of 2011 Strong performance in trainer and customer support segments Business and general aviation segment continues to be
Slide 28: Hawker Beechcraft Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Revenue $2.8B $3.1B LTM EBITDA $62M $431M Net Debt $1.8B $2.3B Net Debt / EBITDA N.M. 5.3x 3
Slide 29: Tomkins
Private Operating Company Review Onex Presenter: Manish Srivastava, Director Tomkins Denver, CO James Nicol, CEO Acquired: September 2010 Total Investment: $1.2 billion
Slide 30: Tomkins Investment Thesis
Private Operating Company Review Operating Performance Investment Thesis Businesses have defensible market positions; ~80% of revenues derived from market leaders Collection of well-known, premium industrial brands that command premium prices Products are inexpensive components of critical systems 2
Slide 31: Tomkins Investment Thesis
Private Operating Company Review Operating Performance Investment Thesis Well-positioned to benefit from the global economic recovery, growth in emerging markets and a rebound in the US non-residential and residential construction sectors Significant cost reduction opportunity at Gates Experienced,
Slide 32: Tomkins Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Revenue $5.0B $4.6B LTM EBITDA $772M $717M Net Debt $2.9B $2.9B Net Debt / EBITDA 3.8x 4.0x 4
Slide 33: JELD-WEN
Private Operating Company Review Onex Presenter: Adam Reinmann, Principal JELD-WEN Klamath Falls, OR Ron Wendt, CEO Expected Close: Q2/Q3 2011 Estimated Investment: $675 million
Slide 34: JELD-WEN Transaction Overview
Private Operating Company Review Operating Performance Transaction Overview Onex expects to invest $675 million and acquire a significant minority interest in JELD-WEN - $475 million in 10% convertible preferred stock in exchange for 39% ownership - $200 million in an 18-month asset sale bridge with
Slide 35: JELD-WEN Investment Thesis
Private Operating Company Review Operating Performance Investment Thesis Global leader in the residential door and window industry Investment near a cyclical trough Operating leverage to a recovery in demand Opportunity to enhance profitability Downside protection 3
Slide 36: SITEL Worldwide Corporation
Private Operating Company Review SITEL Worldwide Corporation Nashville, TN David Garner, CEO Acquired: April 1998 Total Investment: $251 million
Slide 37: SITEL Operating Performance
Private Operating Company Review Operating Operating Performance Performance Stabilized performance with quarter-over-quarter growth since Q2 2010 Strengthened senior management team Continued opportunity for margin expansion from “near/off-shore” capacity, management actions and SG&A rationalizatio
Slide 38: SITEL Financial Review
Private Operating Company Review Financial Review March 2011 March 2010 LTM Revenue $1.3B $1.5B LTM EBITDA $119M $132M Net Debt $644M $599M Net Debt / EBITDA 5.4x 4.5x 3
Slide 39: Center for Diagnostic Imaging
Private Operating Company Review Center for Diagnostic Imaging Minneapolis, MN Robert V. Baumgartner, CEO Acquired: January 2005 Total Investment: $73 million
Slide 40: Center for Diagnostic Imaging Operating Performance
Private Operating Company Review Operating Operating Performance Performance Growing organically and through acquisitions; approximately 30 facilities added since 2004 Improving same-center revenue trends Successful hospital and radiologist partnership model Recapitalization completed May 2011 resul
Slide 41: Center for Diagnostic Imaging Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Revenue $145M $101M LTM EBITDA $39M $28M Net Debt $111M * $86M Adj. Net Debt / EBITDAR 3.3x * 3.7x *Pro forma for May 2011 recapitalization. 3
Slide 42: The Warranty Group
Private Operating Company Review The Warranty Group Chicago, IL David L. Cole, Chairman and CEO Acquired: November 2006 Total Investment: $488 million
Slide 43: The Warranty Group Operating Performance
Private Operating Company Review Operating Operating Performance Performance Earnings increased 89% since acquisition, reducing purchase price to less than 5x net income Paid $161 million in distributions since acquisition ($50 million to Onex) Reduced debt-to-total capitalization to 18% 2011 expect
Slide 44: The Warranty Group Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Net Revenue $1.2B $1.2B LTM Net Income excluding Purchase Accounting $123M $65M Total Debt $192M $200M Cumulative Distributions $161M N/A 3
Slide 45: RSI Home Products
Private Operating Company Review RSI Home Products Anaheim, CA Alex G. Calabrese, Chairman and CEO Acquired: October 2008 Total Investment: $318 million
Slide 46: RSI Operating Performance
Private Operating Company Review Operating Performance Revenue increased due to organic market share gains and the Continental Cabinets acquisition Introducing several innovative new products and expanding distribution Overall performance has been significantly better than the company’s peers 2
Slide 47: RSI Investment Review
Private Operating Company Review Operating Performance Investment Review Largest bathroom cabinet manufacturer; third largest cabinet manufacturer overall $318 million investment in a preferred security with significant downside protection Onex well protected due to limited leverage and the structur
Slide 48: Tropicana Las Vegas Hotel and Casino
Private Operating Company Review Tropicana Las Vegas Hotel and Casino Las Vegas, NV Alex Yemenidjian, Chairman and CEO Acquired: May 2009 Total Investment: $279 million
Slide 49: Tropicana Operating Performance
Private Operating Company Review Operating Operating Performance Performance Operating environment remained challenged in 2010; since 2007, visitation down 5%, Strip gaming revenue down 22% and room rates down 28% Room capacity increased by over 8,000 (6% expansion) During renovation period, aggress
Slide 50: Tropicana Financial Review
Private Operating Company Review Financial Review March 2011 At Acquisition LTM Net Revenue $58M $97M LTM EBITDA ($21M) ($11M) Net Debt $36M N/A Net Debt / EBITDA N/A N/A 3
Slide 51: ResCare
Private Operating Company Review ResCare Louisville, KY Ralph G. Gronefeld, CEO Acquired: June 2004/Taken Private: December 2010 Total Investment: $204 million
Slide 52: ResCare Operating Performance
Private Operating Company Review Operating Operating Performance Performance Continued tuck-in acquisitions of home care and MR/DD businesses at accretive multiples Reimbursement environment remains challenged; no material rate or service cuts to date Significant focus on accelerating homecare organ
Slide 53: ResCare Financial Review
Private Operating Company Review Financial Review March 2011 Take-Private Initial Investment LTM Revenue $1.6B $1.6B $968M LTM EBITDA $111M $108M $63M Net Debt $367M $395M $91M Net Debt / EBITDA 3.3x 3.7x 1.4x 3
Slide 54: ONCAP
ONCAP Michael Lay Managing Partner
Slide 55: ONCAP Overview
ONCAP Overview Established in 1999 as Onex’ mid-market private equity platform - Dedicated 11-person investment team ONCAP I (1999): C$400M - 4.1x MOC (all > 2x); 43% gross IRR ONCAP II (2006): C$574M - November 2010 sale of CSI: 5.8x MOC, 57% gross IRR - Three new investments over the last year: Sp
Slide 56: ONCAP II Value Creation
ONCAP II Value Creation LTM EBITDA Net Debt/LTM EBITDA $129M 4.1x $97M 2.9x At LTM Through At At Acquisition March 31, 2011 Acquisition March 31, 2011 Healthy investment portfolio; no leverage/liquidity issues Companies have completed 28 add-on acquisitions Dollar amounts are in companies’ functiona
Slide 57: Pinnacle Renewable Energy Group
Pinnacle Renewable Energy Group Business Overview Investment Thesis Producer of wood pellets for markets Diversified mill network in substantial fibre around the world basket Based in British Columbia Access to efficient logistics network Markets over one million tonnes of wood Contracted cash flows
Slide 58: Casino ABS
Casino ABS Business Overview Investment Thesis Headquartered in Edmonton, largest Stable growing industry with strong barriers casino operator in Alberta to entry Four casinos strategically located in high- Overall provincial leadership with strong traffic areas (Edmonton (2), Calgary and market sha
Slide 59: ONCAP III
ONCAP III Began fundraising in February Fund size of up to C$800 million in capital commitments As with each of its Funds, Onex will be the largest limited partner - 35% of capital commitments to the Fund including commitments from Onex management First close held in May Expected final close in Q3 2
Slide 60: Onex Valuation
Onex Valuation Seth M. Mersky Managing Director
Slide 61: Onex Valuation Decomposed
Onex Valuation Decomposed Value Per Share ($ millions) Fully Diluted 2010 Management Fee Profit $300 $2.28 ($20M*15x)(1) Average Carried Interest Earned 180 1.37 ($30M*6x) Invested Capital 3,555 26.97 Cash 1,308 9.92 Total $5,343 $40.54 Note: Cash and per share amounts are reflected on a diluted bas
Slide 62: Onex Partners: Earnings Growth
Onex Partners: Earnings Growth Cost Reduction Realized and Publicly Traded Investments Total Realizations and Remaining Value $7.8B Total Capital Invested at Cost 2.3B Total Gains $5.5B Cost Reduction at Original Thesis $390M * 8.6x $3.4B 2
Slide 63: Onex Valuation Decomposed
Onex Valuation Decomposed Value Per Share ($ millions) Fully Diluted 2010 Management Fee Profit $300 $2.28 ($20M*15x)(1) Average Carried Interest Earned 180 1.37 ($30M*6x) Invested Capital 3,555 26.97 Cash 1,308 9.92 Total $5,343 $40.54 Note: Cash and per share amounts are reflected on a diluted bas
Slide 64: Panel Discussion
Panel Discussion Gerald W. Schwartz Robert Le Blanc Seth M. Mersky
Slide 65: ONEX.COM
TRIM ONEX.COM