Canada’s Onex Tops Own Record

Firm: Onex Corp.

Fund: Onex Partners II LP

Amount Raised: $3.45 billion

Target: $3.35 billion

Placement Agent: None

Onex Corp. has completed the fundraising for its second large-market buyout fund, taking in $3.45 billion (C$3.87 billion) in capital commitments. The new tally bests its own record for the largest Canadian buyout fund, which was set in 2004 when the Toronto firm took in $1.7 billion for its debut third-party vehicle. The publicly held Onex completed the fundraise in five months’ time.

The latest Onex fund further separates the firm from its Canadian peers. Birch Hill Equity Partners, the Toronto-Dominion spinout, owns the second largest vehicle, at C$850 million in size, while groups such as TorQuest Partners, Richardson Capital and EdgeStone Capital Partners (recently acquired by GMP Capital Trust), operate funds much smaller in stature.

Andrew Sheiner, a managing director at Onex, said nearly all of its LPs re-upped for the recent fund, and the firm managed to add 10 new relationships based largely in Asia and Europe. Onex Corp. has also increased its stake in the latest fund, controlling a 41% interest in the vehicle, compared with the 24% stake held in its predecessor. Onex will look to invest between C$200 million and C$500 million per deal and will likely invest in between eight and 12 transactions.

Onex has never had an industry focus, although it tries to buy companies it believes are undervalued. It made several healthcare investments out of Onex Partners I simply because that was where it was finding value, explained Sheiner, who added, “We migrate from sector to sector.”

The reason Onex raises larger vehicles than its Canadian peers is because the firm’s focus extends beyond its backyard in Toronto, whereas the other firms are raising funds sized appropriately for Canada’s smaller marketplace. In fact, around 75% of Onex’s capital ends up in U.S.-based companies.

The firm has been operating out of New York since 1986, and its offices there hold roughly one third Onex’s professionals. “We’ve been investing in the U.S. longer than most U.S. firms have been around,” said Sheiner.

Onex has raised five funds overall, including the two ONCAP funds, which are the firm’s small- and mid-cap vehicles, and Onex Real Estate Partners LP, its vehicle used for commercial and residential real estate. The firm’s large market debut fund, meanwhile, has so far generated a return north of 50%, according to Sheiner.

Onex has already started investing out of its new fund, acquiring product warranty underwriter Aon Warranty Group in an C$800 million deal. The firm contributed C$185 million of equity to the deal, which came from both its first and second funds.

Other portfolio companies include electronics manufacturing services provider Celestica Inc., therapeutic radiology provider Center for Diagnostic Imaging and the largest Canadian movie theater operator, Cineplex Entertainment. ONCAP’s investments include military and aviation electronics maker CMC Electronics and organic waste recycler Environmental Management Solutions. Onex is also currently looking to float Spirit AeroSystems on the New York Stock Exchange. —M.C.