How much cash can Onex carry?
The private equity pioneer put another $300-million (U.S.) into its coffers on Tuesday by selling 6 million shares in U.S. health care company Emergency Medical Services Corp., or EMS.
Money raised from this sale will be split between the Onex and funds that it runs for outside investors: Onex itself is selling 2.3 million EMS shares, and the stock was trading on the New York Stock Exchange at $50 when the sale was announced.
Onex is cashing in its four-year-old investment in Colorado-based EMS at a time when the Toronto-based parent is already flush with $900-million. While there are no hard-and-fast targets on cash holdings, Onex chairman and CEO Gerry Schwartz said in a conference call with analysts last week that the company is comfortable operating with just $200-million in cash.
EMS was acquired in 2005 for $214-million, and Onex put up $80-million of that total. The company now sports a $2.6-billion market capitalization, and Onex continues to hold a 39 per cent equity stake.
"We describe the announcement as 'slightly positive' as it is an indication that the underlying economic environment and state of equity markets are allowing private equity firms such as Onex to go about their traditional business, including the monetization of investments," said a report Wednesday from BMO Nesbitt Burns analyst Peter Sklar. He added: "EMS has turned out to be another successful investment for Onex, with the current EMS stock price at just over $50 and with Onex having a cost base of about $7 per share."
The EMS share sale was handled by Bank of America/Merrill Lynch, Goldman Sachs and J.P, Morgan.
Onex could raise even more money in 2010, as sources say the company is contemplating initial public offerings of subsidiaries Husky Injection Molding Systems and The Warranty Group if stock markets remain receptive to new issues.
Mr. Schwartz said in last week's conference call that Onex is looking at two large acquisitions, and that the 25-year-old private equity company may work with a partner on these investments.
One likely target is AIG unit International Lease Finance Corp., an aircraft leasing company that could fetch more than $4-billion. Onex has reportedly teamed up with Greenbriar Equity Group, a fund focused on the transportation sector, to bid on ILFC.
Andrew Willis