Alternative asset manager Onex Corp. raised US$765-million on Thursday from a share sale in data business Clarivate PLC, taking advantage of an ongoing equity market rally.
As stock markets bounce back from the sell off in late March driven by the novel coronavirus pandemic, Onex and a number of sophisticated investors are cashing in long-held investments, resuming a selling trend seen over the past year when stock indices were hitting historic highs.
Along with the Clarivate sale, this week saw initial public offerings from private equity-backed Warner Music Group and ZoomInfo Technologies Inc.
Toronto-based Onex teamed up with Baring Private Equity Asia in 2016 to buy Clarivate from Thomson Reuters Corp. for US$3.55-billion. After a series of acquisitions, the company now has a US$8.2-billion market capitalization. On Thursday, Clarivate sold a total of 48 million shares at US$22.50 each, with 14 million shares coming from the company and 34 million sold by the two fund managers. Onex’s share in the sale was US$166-million. Citigroup Global Markets Inc., Goldman Sachs & Co., RBC Capital Markets, BofA Securities and Barclays Capital Inc. led the Clarivate offering.
Over the past year, Onex founder and chief executive Gerry Schwartz repeatedly said the company saw opportunities to raise money by selling stakes in its businesses, due to the relatively high valuations on public companies. In early March, Onex raised $US202-million from selling part of its stake in packaging company SIG. Last year, Onex pulled in US$3.7-billion selling businesses, the second highest amount it has realized in its 36-year history.
Onex went into the COVID-19 crisis holding US$1.9-billion of cash, and another US$4.3-billion of client capital. Mr. Schwartz signalled the company plans to start using its war chest to acquire distressed companies. In a conference call last month, he said: “We believe we’re well-positioned to help good businesses with bad balance sheets.”
Private equity companies are also tapping cash reserves to support businesses losing money during the pandemic. In a recent investor letter, Brookfield Asset Management chief executive Bruce Flatt said: “In reflecting on what really matters to our business, it is Liquidity, Liquidity and Liquidity, in that order.” Brookfield went into the crisis with approximately US$60-billion of its own cash and client capital, and Mr. Flatt said the company invested $US2-billion in recent weeks buying back its own shares and taking small positions in publicly traded companies that it views as undervalued.
Public-market investors are now snapping up businesses that private equity funds are selling, after a pause in most capital markets activity in late March and April while the world dealt with the coronavirus.
Billionaire Len Blavatnik raised US$1.9-billion this week by selling a stake in Warner Music – home to artists Ed Sheeran and Eric Clapton – in an IPO that valued the company at US$12.7-billion. Mr. Blavatnik’s private equity firm, Access Industries, acquired the business in 2011 for US$3.3-billion. The IPO was delayed in early March due to the pandemic, then went ahead in June despite the music industry facing the challenge of concert venues being closed for the foreseeable future.
In addition, a collection of private equity firms that includes TA Associates and Carlyle Group sold a US$903-million stake in database service ZoomInfo Technologies, and the stock promptly jumped 40 per cent. The company has no connection to Zoom Video Communications, the teleconferencing firm whose fortunes are soaring as it connects the quarantined.
An IPO market that shut down two months ago is expected to see a flurry of deals in coming weeks, with 10 companies expected to make debuts on the Nasdaq and New York stock exchanges by the end of next week, according to data-service company MarketWatch.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.