How Onex is beating its private equity peers with 161% returns to shareholders over five years

Onex Corp. hasn\'t reported net income since 2011 and has had a negative return on assets each year since then, according to data compiled by Bloomberg. Yet the company has returned 161% to shareholders over the past five years.

Onex Corp., Canada\’s largest buyout firm, hardly looks on paper like a company whose total go back to shareholders would dramatically outperform its peers.

The Toronto-based private equity finance firm hasn\’t reported net income since 2011 and it has had a negative return on assets each year since then, based on data published by Bloomberg. Yet the company, led by founder and Chief Executive Officer Gerry Schwartz, has returned 161% to shareholders over the past five years, in contrast to a 69% grow in the S&P Listed Private Equity Index.

There\’s a simple explanation for Onex\’s outperformance, said Scott Chan, an analyst at Canaccord Genuity Corp. in Toronto.

\”No one looks at the financials,\” he said in an interview. Investors are more impressed by Onex\’s capability to boost capital, and to buy and sell companies, he explained.

In the U.S., investors in private equity firms like KKR & Co. LP, the The Carlyle Group LP, and Blackstone Group LP tend to be more focused on quarterly returns. In Canada, a longer-term view is adopted. Investors remain confident Onex can deploy about $3.8 billion in cash on its books by Dec. 31 like a dry spell for acquisitions seems to be coming to an end.

\”You\’re betting around the investment team,\” said Chan. \”You\’re betting on their own investment process. You\’re betting that they can drive added value for their investments on the five- or seven-year period and then sell it at a much higher valuation.\”

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