It's not the normal exit strategy adopted by Onex Corp. but the country's best-known private equity firm is set to realize on one its investments via an initial public offering of shares.
JELD-WEN Holding Inc., a manufacturer of windows and doors and which has been part of the Onex group since October 2011, is set to go public in the U.S. The company, that was started in Oregon and is now based in Charlotte N.C., has filed what's known as an S-1, a step that's required for an initial public offering.
It's not known how much the company plans to raise from the offering. What's known is that the company filed a US$100 million maximum aggregate offering price, a number that's required “for the purpose of calculating the registration fee.” A US$100 million offering comes with a US$10,700 registration fee. What else is known is that four firms – Barclays, Citigroup, Credit Suisse and JP Morgan – are acting as joint book-running managers in the proposed offering.
In a note, Paul Holden, an analyst at CIBC World Markets said that “overall, we view this event as positive. While it is difficult to quantify potential accretion to NAV, we do expect there will be some increase in Onex's mark-up for private investments as the actual IPO approaches. We expect Onex to realize a significant gain on the sale of JELD-WEN given the growth in margins and EBITDA in recent years.”
According to Onex's web site, that investment started in late 2011. Back then Onex invested $US871 into the company, of which US$689 million came from Onex Partners 111, a fund managed by Onex. (Of the US$689 million, Onex's share was US$124 million.) The rest of Onex's investment (US$182 million) came from its role as a co-investor. At that time Onex didn't buy all the shares of JELD-WEN leaving a minority stake with employees and family members of the founder. The fund owns 83 per cent of the company, of which Onex's share is 21 per cent.
Onex's US$871 million investment was in two parts: US$700 million of convertible preferreds that gave it the right to acquire a 58 per cent ownership stake; and a US$171 convertible note that could be redeemed within 18 months from the sale of non-core assets, or (of not redeemed) converted into additional convertible preferred stock.)
It's not known why the Onex Group decided to monetize part of its stake via an initial public offering. Calls to Onex seeking a comment weren't returned – though it has been reported that last August that it was seeking a buyer for the whole company. A sale, over time allows for the possibility of higher proceeds, if the stock market co-operates. Since last August the US market – as measured by the S&P 500 – is up by at least 15 per cent.
But selling the whole thing at one time has been Onex's modus operandi. Earlier this year it used that normal exit strategy to monetize its investment in KraussMaffei Group via a sale to China National Chemical Corporation for a cash enterprise value of €925 million (Three years earlier, the Group invested €276 million investment in the company.)
In 2015, two of the Group's investments – the Tropicana Las Vegas and Sitel Worldwide Corp. – were sold again without using an IPO.