The Onex Corporation logo is displayed at the company's annual general meeting in Toronto on in 2012.Nathan Denette/The Canadian Press
Onex Corp. is buying U.S. employee-benefits provider OneDigital for US$960-million, the latest in a string of pandemic-era investments in service businesses from the deep-pocketed asset manager.
Toronto-based Onex, which is looking to invest approximately US$6-billion of capital from clients and its own coffers, announced Thursday it is acquiring an 83-per-cent stake in OneDigital, which offers insurance, health care and human resources services to corporate customers. OneDigital is based in Atlanta, with 2,000 employees serving more than 50,000 clients. The transaction values the company at US$2.65-billion, including assumed debt.
“OneDigital has established a leading national insurance brokerage and a customer- and employee-centric culture,” said Todd Clegg, an Onex managing director, in a press release. He said the company, which was founded 20 years ago, can expand its business with existing clients and continue to grow through acquisitions.
Onex is buying OneDigital from private-equity firm New Mountain Capital LLC, which acquired the business in 2017 for US$560-million. New York-based New Mountain will continue to be a minority shareholder in OneDigital, as will the company’s employees. The transaction is expected to close by the end of the year.
“The deal highlights two key underlying themes: Onex is able to use its strong financial flexibility to source sizeable deals despite an uncertain operating environment [and] the company is able to add another low-cyclical investment to its portfolio, likely adding to its resiliency,” analyst Phil Hardie at Scotia Capital said in a report.
When the novel coronavirus upended the global economy in March – months after the fund manager committed US$265-million to a buyout of WestJet Airlines Ltd. – Onex founder and chief executive officer Gerry Schwartz sent a letter to shareholders that stressed his company’s financial strength and measured approach. He said: “We hope all our clients and limited partners are doing what we’re doing: remaining calm, looking for opportunities to make great investments and above all else, not being driven by fear or panic to sell as markets find their bottom.”
Since then, Onex has made a series of investments in service firms, a sector that accounts for about 30 per cent of the company’s private equity portfolio. Onex’s total assets under management are US$35.6-billion.
In April, Onex acquired U.K health care staffing business Independent Clinical Services Group Ltd. in a transaction that valued at an estimated US$1.4-billion, the first significant global private-equity transaction to play out after the pandemic hit Europe and North America.
In June, Onex invested an additional US$400-million in U.S. trade-show operator Emerald Holding Inc., which it has owned for seven years. And in September, the company put an additional US$110-million into Chicago-based insurer Ryan Specialty Group LLC to help fund an acquisition.
In recent months, Onex also hired a number of executives to deepen the teams that run its US$12-billion portfolio of credit investments. Onex’s credit business is focused on non-investment grade bonds, collateralized loan obligations and direct lending.
Editor’s note: An earlier version of this article said investments in the services sector accounted for about 30 per cent of Onex's portfolio. In fact, the sector accounts for about 30 per cent of Onex's private equity portfolio.
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Andrew Willis