Onex Corporation · TSX:ONEX
Onex — Investor Day (June 2012)
71 slides from Onex's investor day presentation, Jun 7, 2012
Slide 1: Investor Day June 7, 2012
‘ Sia _ i neaure TT ye ol) INVESTOR DAY June 7, 2012
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: Introduction
Introduction Emma Thompson Vice President, Investor Relations
Slide 4: Agenda
Agenda Emma Thompson Introduction Vice President, Investor Relations Donald W. Lewtas Onex Overview CFO David J. Mansell Proven Investment Strategy Managing Director Private Operating Company Review Onex Team Michael Lay ONCAP Managing Partner, ONCAP Michael Gelblat Onex Credit Partners CEO, Onex Cr
Slide 5: Our Objective
Our Objective Long-Term Proprietary Capital Per Share Growth Exceeding 15% Per Year All amounts in US$ at March 31, 2012 unless otherwise specified. 2
Slide 6: Performance
Performance Q1-12 2011 2010 2009 OCX Proprietary Capital per Share +7% +8% +17% +16% OCX Share Price +11% +10% +28% +30% S&P TSX Composite +4% -11% +14% +31% S&P 500 +12% +0% +13% +23% 3
Slide 7: Onex Overview
Onex Overview Donald W. Lewtas CFO
Slide 8: Overview
Overview Investor and manager - Founded in 1984; public since 1987 Leading private equity investor - 29% returns over 28 years (3.3x MoC)* - Attractive, diversified portfolio of industry-leading businesses Compelling business model for Onex shareholders - Own capital at work - Committed management f
Slide 9: Our Business
Our Business Total AUM: $15B Proprietary Capital Third-Party Capital $4.8B $9.9B Investing Strategy: Asset Management Strategy: Acquire, Build and Grow Manage and Grow Third-Party High-Quality Businesses Capital 2
Slide 10: How We Are Invested
How We Are Invested ($ in millions) Proprietary Capital Private Equity Mar 31, 2012 Mar 31, 2011 Onex Partners Private Companies1,2 $ 1,333 $ 2,121 Public Companies2,3 822 579 Unrealized Carried Interest on Onex Partners Investments4 119 164 ONCAP5 335 183 Direct Investments Private Companies6 204 2
Slide 11: Schedule of Fees and Expenses
Schedule of Fees and Expenses ($ in millions) December 31 2011 2010 Revenue Items Base Management Fees1 $ 110 $ 102 Transaction Fees, Net - 16 Carried Interest and Performance Fees Received2 72 8 Interest and Other Treasury Income3 8 19 Total 190 145 Expense Items4 Base Compensation 29 25 Variable C
Slide 12: Private Equity Management Fees
Private Equity Management Fees Committed Third-Party Capital Invested Third-Party Capital Fund Amount Fee Amount1 Fee Onex Partners I $1.2 billion 2.00% $419 million 1.00% Onex Partners II $2.0 billion 2.00% $763 million 1.00% Onex Partners III $3.5 billion 1.75% $1.4 billion 1.00% ONCAP II C$286 mi
Slide 13: Carried Interest Potential
Carried Interest Potential Returned $1.3 billion of capital to Onex Partners LPs - $178 million of realized carried interest to Onex Remaining $2.8 billion of LP capital invested in the three Funds - $119 million of unrealized carried interest included in Onex’ proprietary capital $1.9 billion of un
Slide 14: Investor and Manager
Investor and Manager Principal investing culture - Growth in proprietary capital per share Manager of third-party capital - Predictable stream of annual management fees that substantially offsets ongoing operating expenses - Meaningful carried interest opportunity Significant financial resources at
Slide 15: Appendix: Global LP Relationships
Appendix: Global LP Relationships By Geography By Type 6% 15% 16% 52% 7% 61% 13% 26% 2% 2% Pensions Sovereign Wealth United States Europe Banks & Insurance FoF & Asset Managers Asia & Australia Canada Endowments High Net Worth 8
Slide 16: How We Are Invested Endnotes
How We Are Invested Endnotes 1 Based on the US$ fair value of the investments in Onex Partners’ financial statements net of the estimated Management Investment Plan (“MIP”) liability on these investments of $24 million (March 31, 2011 − $60 million). 2 In March 2012, Allison Transmission completed a
Slide 17: Schedule of Fees and Expenses Endnotes
Schedule of Fees and Expenses Endnotes 1 The management fees include those from third-party Limited Partners in the Onex Partners and ONCAP private equity funds, those earned by Onex Credit Partners and Onex' retained portion of the management fees from operating companies. 2 Carried interest and pe
Slide 18: Proven Investment Strategy
Proven Investment Strategy David J. Mansell Managing Director
Slide 19: Our Objective
Our Objective Long-Term Proprietary Capital Per Share Growth Exceeding 15% Per Year All amounts in US$ unless otherwise specified. 1
Slide 20: Annual Growth Model
Annual Growth Model Growth in Project Onex Return Proprietary Capital IRR IRR1 on Cash2 Per Share 15% 16% 1% 12% 20% 21% 1% 15% 25% 26% 1% 19% 29% 30% 1% 22% 75% invested 25% in cash 1 Assumes private equity investments held for five years. 2 Assumes blended return on cash and Onex Credit Partners.
Slide 21: Long-Term Track Record
Long-Term Track Record Realized, Substantially As at June 30, 2012 Realized and Publicly Traded Total Gross Gross Net Investment Multiple Gross Multiple Multiple Gross Net Period of Capital1 IRR2 of Capital1 of Capital3 IRR2 IRR4 Direct 1984 - 2003 2.9x 27% 2.6x N/A 27% N/A Investments Onex Partners
Slide 22: Proven and Sustainable Process
Proven and Sustainable Process Disciplined Investing Active Ownership Purchase discipline Cost reduction - Value mindset - Procurement/supply chain - Strong franchises - Process redesign/lean - SG&A Prudent financial leverage Executive alignment Expertise - Carve-outs Labour relations - Operational
Slide 23: Active Ownership
Active Ownership Company Debt Paydown1 EBITDA Growth M&A Activity Refinancing JELD-WEN2 - ResCare - Tomkins - Tropicana Las Vegas3 - - RSI Home Products N/A N/A - - Carestream Health - - The Warranty Group - - Center for Diagnostic Imaging Allison Transmission
Slide 24: Value Creation at Work
Value Creation at Work Onex Partners Private Company Valuations1 145% of cost2 at March 31/12 vs. 122% of cost2 at March 31/11 Drivers of Valuation Increase Debt reduction: 70% EBITDA improvement: 6% Multiple expansion: 24% 1 Includes Onex Partners private companies held at both March 31, 2011 and M
Slide 25: Tomkins
Tomkins Manish Srivastava Principal
Slide 26: Tomkins Investment Overview
Tomkins Investment Overview Proprietary $5 billion going-private transaction completed in September 2010 First introduced to Tomkins several years prior to acquisition Acquired in equal partnership with Canada Pension Plan Investment Board Onex’ institutional experience investing in industrial and b
Slide 27: Original Investment Thesis
Original Investment Thesis #1 market share businesses Collection of well-known, premium industrial brands that command premium prices Products are inexpensive components of critical systems Well positioned for cyclical recovery in end markets and growth in emerging markets Several market-leading, no
Slide 28: At a Glance
At a Glance ($ in millions) Key Market LTM 3/31/2012 Products Position Sales EBITDA / Margin $4,247 $663 / 15.6% - Power transmission belts and accessories #1 $2,960 $546 / 18.4% - Hydraulic hoses and couplings - Air distribution products for HVAC systems #1 $886 $109 / 12.3% - Dampers, grilles, reg
Slide 29: Active Ownership: Cost / Efficiency Improvement
Active Ownership Cost / Efficiency Improvement Program at Gates Comprehensive improvement program identified during due diligence - Costs - Procurement (direct and indirect materials) - Manufacturing and distribution - SG&A and IT - Working capital - Revenue 4
Slide 30: Active Ownership: Acquisitions & Dispositions
Active Ownership Acquisitions & Dispositions Examined seven tuck-in acquisition opportunities at Gates and Air Distribution, completed one Sold five businesses for ~$1 billion since acquisition - Proceeds used to reduce net debt, de-risking investment Company Completed April 2011 August 2011 August
Slide 31: Active Ownership: Specialized Boards
Active Ownership Specialized Boards for Gates and Air Distribution Representative background of external directors Gates Air Distribution 6
Slide 32: Active Ownership: Opportunistic Debt Market Activity
Active Ownership Opportunistic Debt Market Activity Re-priced $1.7 billion of term debt five months post-acquisition - Net interest savings of $100 million - Interest savings and added covenant flexibility improved cash flow and de-risked investment Continuous active evaluation of capital markets al
Slide 33: Long-Term Vision
Long-Term Vision Gates Air Distribution Continue to implement cost Manage operating leverage savings program for a recovery in end market demand Complete transition to “One Gates” Evaluate tuck-in acquisitions to increase presence in Increase focus on industrial select categories end markets Use inn
Slide 34: JELD-WEN
JELD-WEN Matt Ross Principal
Slide 35: JELD-WEN Investment Overview
JELD-WEN Investment Overview Invested $871 million through two securities: - $700 million in 10% convertible preferred stock for 57% ownership - $171 million in 10% convertible note maturing in March 2013 ($52 million repaid to date) Completely proprietary transaction Third building products investm
Slide 36: At a Glance
At a Glance One of the world’s largest window and door manufacturers Diversified end-markets and distribution channels Global presence in five continents Components Non-Residential Australia 7% 14% 16% Residential New Windows Doors Residential New North America Windows Construction North49% America
Slide 37: At a Glance
At a Glance ($ in millions) Key Data – LTM 3/31/2012 Revenue $3,173 Adj. EBITDA $157 % margin 4.9% Capex $45 % of sales 2.9% Net debt1 $527 LTM leverage 3.4x Employees ~20,000 Geography 85 countries Products Tens of thousands 1 Excludes $120 million of convertible notes held by Onex Partners III. 3
Slide 38: Original Investment Thesis
Original Investment Thesis Clear global leader in doors and windows Investing near a cyclical trough Downside protection through low leverage and preferred security Significant cost reduction opportunity 4
Slide 39: Active Ownership: Superior Performance Program
Active Ownership Superior Performance Program Focus on Cost - Rationalize capacity - Drive manufacturing efficiency - Leverage global purchasing power - Redirect resources based on cost-benefit Focus on the Customer - Strengthen position for market growth - Strengthen existing relationships and grow
Slide 40: Active Ownership: Superior Performance Program Initiatives
Active Ownership Superior Performance Program Initiatives by Area Representative Projects R&D Manufacturing - Low-cost Louisiana door skin facility 7% 45% - Plant consolidations - Leverage global purchasing power - Reduce number of freight vendors Sales & Marketing - Prioritize marketing spend 22% -
Slide 41: Active Ownership: Augmented Management Team
Active Ownership Superior Performance Program Augmented Management Team - President - EVP Operations, SPP Chair - Chief Information Officer Revised Compensation Structure - Short-term incentive plan linked to financial performance - Long-term incentive plan linked to growing shareholder value 7
Slide 42: Allison Transmission
Allison Transmission Kosty Gilis Managing Director
Slide 43: Allison Transmission Investment Overview
Allison Transmission Investment Overview Carve-out from General Motors acquired through a limited auction process in August 2007 Purchase price of $5.6 billion included $1.5 billion of equity split equally with The Carlyle Group - Onex’ $762.5 million investment split between Onex Partners II ($600
Slide 44: At a Glance
At a Glance #1 global manufacturer of fully-automatic transmissions for commercial vehicles Allison is the premier global fully-automatic transmission brand Headquartered in Speedway, Indiana with international facilities in Hungary and India IPO completed in March (NYSE: ALSN) Strong Financial Prof
Slide 45: On-Highway
On-Highway Refuse Emergency School Bus Pick-up and Delivery Motorhome Transit Bus 3
Slide 46: Off-Highway and Military
Off-Highway and Military Off-Highway – Energy Off-Highway – Hauling Military – Tracked Military – Wheeled 4
Slide 47: Original Investment Thesis
Original Investment Thesis Highly profitable with exceptional free cash flow Outstanding market position, brand and technology Increasing penetration of automatics globally Diverse revenue stream mitigates cyclicality Value creation opportunities upon separation from GM Exceptional senior management
Slide 48: Superior Financial Profile
Superior Financial Profile + Attractive EBITDA margins (>30%) + Low maintenance capex requirements (~2-3% of sales) + Low operating working capital (<10% of sales) + Tax shield = High rate of free cash flow conversion Financial profile reflects strength of the end user value proposition End users pa
Slide 49: Active Ownership: Labour
Active Ownership Labour Identified opportunity in due diligence First Allison-specific UAW labour contract ratified in May 2008 - Previously governed by General Motors’ master agreement Key goals - Improve cost competitiveness (i.e. multi-tier wage structure) - Increase productivity - Allow workers
Slide 50: Active Ownership: Increased Investment in Business
Active Ownership Increased Investment in Business Maintenance of technology leadership - Invested over $450 million in product-related research and development for 2008-2011 - Products focused on fuel-efficiency (i.e. TC10, hybrid, new mechanical configuration) - More new products under development
Slide 51: Strong Execution
Strong Execution $2,500 40% $2,500 40% ($ in millions) $2,248 $2,000 $2,163 35% $2,061 34.1% $2,000 $1,926 33% 35% 32% $1,767 34% $1,500 33% 30% 32% 28% $1,500 30% 26% 28% $1,000 25% 26% $1,000 25% $712 $766 $500 $617 20% $544 $501 $500 20% $0 15% $0 15% 2008 2009 2010 2011 LTM Revenue EBITDA EBITDA
Slide 52: Acquisition vs. Current
Acquisition vs. Current Investment Results to Date ($ in millions) At Acquisition (2007E) LTM Mar-12 Change Net Sales $2,221 $2,248 + $27 Adjusted EBITDA $554 $766 + $212 Adjusted EBITDA margin 25% 34% + 900 bps Firm Value (Inc. Fees & Exp.) $5,725 $6,418 + $693 Net Debt $4,200 $2,981 - $1,219 Net L
Slide 53: Significant Private Operating Company Review
Significant Private Operating Company Review 0
Slide 54: Significant Private Operating Company Review
Significant Private Operating Company Review (US $) LTM Revenue1 LTM EBITDA2 Net Debt Net Debt/EBITDA Cumulative At At At At Distributions Acquisition March 2012 Acquisition March 2012 Acquisition March 2012 Acquisition March 2012 Center for Diagnostic Imaging 101MM 152MM 28MM 38MM 86MM 100MM 3.1x 2
Slide 55: Significant Private Operating Company Endnotes
Significant Private Operating Company Endnotes 1 Based on local GAAP of the individual operating company. 2 EBITDA is a non-GAAP measure and is based on the local GAAP of the individual operating companies. These adjustments may include non-cash costs of stock-based compensation and retention plans,
Slide 56: ONCAP
ONCAP Michael Lay Managing Partner
Slide 57: ONCAP Overview
ONCAP Overview Established in 1999 as Onex’ mid-market private equity platform - Dedicated 12-person investment team ONCAP I (1999): C$400 million - Fully realized with 4.1x gross MOC (all > 2x); 3.1x net MOC; 43% gross IRR; 33% net IRR ONCAP II (2006): C$574 million - Fully invested in eight busine
Slide 58: Consistent Investment Criteria
Consistent Investment Criteria Strong, sustainable free cash flow characteristics - Barriers to entry to sustain competitive advantage Market leadership in fragmented industries - Opportunity to build through add-on acquisitions Opportunity to develop strong partnership with senior management team -
Slide 59: ONCAP I and II: Realized Returns
ONCAP I and II: Realized Returns Multiple Source Exit Gross IRR* of Capital Limited auction process Strategic sale 5.8x 57% Proactive industry Strategic sale 2.0x 22% research Proactive industry Strategic sale 4.2x 35% research Onex relationship IPO 2.1x 30% 3 Limited auction process Financial buyer
Slide 60: ONCAP III Update
ONCAP III Update Final close held in September 2011: C$800 million fund Onex represents up to 35% of commitments 28 institutional investors - 18 new investors committed C$349 million - Good international diversification of investor base 22% invested in three operating companies1 1 Includes amounts c
Slide 61: Recent Investments
Recent Investments Fund ONCAP II ONCAP II and III ONCAP III ONCAP III ONCAP Capital C$61 million C$111 million $44 million $103 million Invested Onex’ C$29 million C$49 million $13 million $30 million Portion Ownership 60% 99% 90% 88% Automotive Extrusion and Wood pellet Casino Business aftermarket
Slide 62: Priorities for 2012
Priorities for 2012 Focus on nine current operating companies Enhance industry research efforts Selectively consider attractive investment opportunities 6
Slide 63: Onex Credit Partners
Onex Credit Partners Michael J. Gelblat CEO
Slide 64: Credit Investing Platform
Credit Investing Platform Acquired in 2007 as Onex’ exclusive credit investing platform 19-person team with an average of 18 years of industry experience Platform for growth - Developing leveragable infrastructure - Expect continued growth in recurring fee income 1
Slide 65: Benefits of Onex Relationship
Benefits of Onex Relationship Strong brand equity Industry expertise Management and corporate relationships Established reputation with institutional investors Access to capital 2
Slide 66: AUM Growth
AUM Growth $1.8B $1.5B $1.3B $782MM $350MM $253MM Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Mar-12 Third-Party Capital Onex Capital All amounts in US$. 3
Slide 67: Leveraging the Platform
Leveraging the Platform Debt Opportunity High Yield Senior Bonds Floating Senior CLOs Credit Structured Products Develop products with complementary investment capabilities and distribution channels Dashed line indicates new strategy. 4
Slide 68: Measured Growth
Measured Growth Experienced team and leveragable infrastructure Plans for additional CLOs and other products Growth in recurring management fee revenues 5
Slide 69: Why Invest in Private Equity
Why Invest in Private Equity Seth M. Mersky Managing Director
Slide 70: Panel Discussion
Panel Discussion Gerald W. Schwartz Robert Le Blanc Seth M. Mersky
Slide 71: ONEX.COM
TRIM ONEX.COM