ONEX Earnings Call: Strategic Moves and Growth Prospects

ONEX Corporation ((TSE:ONEX)) has held its Q3 earnings call. Read on for the main highlights of the call.

ONEX Corporation’s recent earnings call highlighted a strategic transformation, marked by the acquisition of Convex and a partnership with AIG, setting the stage for long-term growth. The sentiment was largely positive, driven by the credit segment’s outperformance and successful private equity realizations, although challenges such as losses in Onex Partners IV and tighter liquidity post-acquisition were noted.

Acquisition of Convex

Onex Corporation has taken a significant step by acquiring a 63% stake in Convex, a prominent insurance organization. This strategic move is aimed at enhancing long-term shareholder value, with Convex showing a remarkable 22% annual growth in gross written premium since 2022. The acquisition is expected to improve profitability steadily, positioning Onex to leverage its expertise in the insurance sector.

Strategic Partnership with AIG

AIG’s commitment of $2 billion to Onex’s private equity and credit funds is a strong endorsement of Onex’s strategic direction. This partnership is anticipated to contribute an additional $15 million to $20 million in fee-related earnings, signaling potential for future collaborations and bolstering Onex’s financial performance.

Credit Segment Outperformance

The credit segment of Onex exceeded expectations by pricing 22 CLO transactions and raising or extending $10.7 billion in fee-generating assets. This performance highlights a robust trajectory in fee-related earnings, underscoring the strength of Onex’s credit operations.

Successful Private Equity Realizations

Onex Partners achieved notable success with the sale of 55% of its investment in OneDigital and a premium sale of its 25% stake in WestJet. These transactions contributed to a strong DPI of 0.7x for Onex Partners V, showcasing the effectiveness of Onex’s private equity strategies.

Losses in Onex Partners IV

Despite gains in other private equity funds, Onex Partners IV recorded losses, which offset some of the positive returns. This challenge highlights the inherent risks in private equity investments, although it does not overshadow the overall positive sentiment of the earnings call.

Limited Liquidity Post Acquisition

Following the acquisition of Convex, Onex anticipates having $500 million in liquidity. While this is deemed sufficient, it is considered tight in the near term, posing a potential challenge for the company’s financial flexibility.

Forward-Looking Guidance

The forward-looking guidance from Onex’s leadership emphasized the strategic acquisition of Convex and the partnership with AIG as pivotal for enhancing shareholder value. Convex’s impressive growth and AIG’s financial commitment are expected to drive Onex’s net asset value expansion and support a shift towards a more capital-light model. The company is poised to exit 2025 on a positive financial note, with strong fee-related earnings.

In conclusion, ONEX Corporation’s earnings call reflects a positive strategic shift with significant moves such as the acquisition of Convex and partnership with AIG. While there are challenges like losses in Onex Partners IV and tighter liquidity, the overall sentiment remains optimistic, with expectations of long-term growth and enhanced shareholder value.