Onex committed $345-million of its own capital to the WestJet Airlines acquisition.The Canadian Press
Private equity firm Onex Corp. posted a US$1.1-billion loss in the first quarter as it wrote down the value of WestJet Airlines and other holdings due to the impact of the COVID-19 outbreak.
Toronto-based Onex booked a US$985-million loss on its investment portfolio and an additional US$67-million loss on its wealth management platform, Gluskin Sheff. Onex said the decrease in value of its investments ranged from declines of between 1 per cent and 77 per cent, and said the company is now ensuring each of its business have access to at least 12 months of capital, to ensure their survival through the current downturn.
Onex founder and chief executive Gerry Schwartz said the 36-year-old firm has endured numerous financial crisis, and “the one thing I know is that we will get back to normal.” Onex has investments in more than 40 businesses and Mr. Schwartz said his goal is to ensure they all emerge from the downturn “stronger and more resilient.”
While the company did not break down the value of individual holdings, analysts estimate the value of WestJet has declined by 65 per cent since the buyout firm acquired the airline in December for $3.5-billion. Onex committed $345-million of its own capital to the WestJet acquisition.
Onex executives said during a conference call Friday that WestJet is effectively in “hibernation,” with the company spending what’s needed to keep its employees and fleet ready to go once passengers start booking flights. Onex expects WestJet’s vacation travel business to ramp up ahead of business traffic as borders open up, but gave no timetable for the airline’s recovery.
Prior to the pandemic-inspired market decline in March, Onex raised US$202-million by selling a portion of its stake in European packaging company SIG Combibloc. In mid-April, Onex announced a major acquisition, agreeing to acquire U.K. medical services firm Independent Clinical Services. Analysts estimate the transaction was valued at US$1.4-billion. Mr. Schwartz said Onex sees opportunities to acquire more businesses, including companies that are in financial distress.
Onex is currently holding US$1.9-billion in cash, and maintained its quarterly dividend of 10 cents per subordinate voting share. Onex said while its holdings in several sectors, including aerospace and travel, are facing significant headwinds, the firm is benefiting from a conscious decision to avoid cyclical industries such as energy and natural resources.
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Andrew Willis