‘Ottawa’ Onex Corp Hungry for Restaurant, Retail Deals to Lighten $2.2 Billion War Chest
Onex Corp. is hungry to buy more companies in the restaurant and retail space, says the firm’s senior managing director.
Seth Mersky said that Onex’s biggest problem at the moment is an abundance of cash and a limited number of opportunities to deploy it. He spoke at the Scotiabank Financials Summit in Toronto on Thursday.
Canada’s largest buyout firm has made several investments this summer, including teaming up to buy one of Thomson Reuters’ business segments and taking stakes in the largest provider of commercial roofing services in the U.S., Tecta America Corp.
“We’ve had a lot of cash for a while — cash has been a problem for a while,” said Mersky.
Toronto-based Onex has some $2.2 billion of cash and near-cash as of August 2016, with an additional $3 billion of uncalled committed capital available from its limited partners.
“The best way to address the cash problem over the long haul is to expand the number of verticals we cover — some spaces are more difficult than others, but we have plenty of white space with higher cash balances and higher AUM,” said Mersky.
Onex owns and has stakes in a number of businesses around the world, and has some $23 billion of assets under management.
In July, Onex entered into a partnership with Baring Private Equity Asia to acquire Thomson Reuters’ intellectual property and science business in an all-cash deal worth US$3.55 billion.
Last year, Onex jumped into the restaurant business with the acquisition of Jack’s Family Restaurants, a regional chain headquartered in Homewood, Ala.
“The Jack’s deal was the first foray into the restaurant space and we’re very actively looking there and in retail for Onex-style deals and opportunities,” said Mersky.
Onex’s shares have struggled to break out in the past 12 months. The stock price is down roughly one per cent since September 2015. Prior to that, the company’s shares saw a five-year run that returned investors some 160 per cent, even as the company consistently reports losses.
Despite the sluggish stock performance of late, Mersky said the company could continue its history of share buybacks as Onex management continually watches the share price.
“We can’t predict where the stock will go, but it’s something we continually want to do,” he said.
Onex reported a second quarter loss of $1.16 from continuing operations in its latest earnings release on Aug. 11, while posting increased revenue of $5.4 billion versus $4.9 billion a year ago.
The stock closed up 0.36 per cent, or 29 cents, to $80.27 on Thursday on the Toronto Stock Exchange.