Private equity capital will continue to own Husky Injection Molding Systems Ltd. in a planned ownership change.
Private equity firm Berkshire Partners LLC and the private equity arm of a Canadian pension fund have signed a definitive agreement to acquire Husky International Ltd., the parent company of Husky Injection for US$2.1 billion from Onex Corp. of Toronto. Onex bought Husky in late 2007 for about $1 billion.
The May 3 announcement came two weeks after a press report that a deal was in the works between Berkshire Partners and Onex. Not mentioned at the time was the involvement of Omers Private Equity Inc., an affiliate of the Omers pension fund for Ontario municipal government workers that oversees C$53 billion (US$55.7 billion) in net assets.
I look forward to partnering with Berkshire Partners and Omers Private Equity in continuing to build a great company that delivers outstanding customer value, Husky President and CEO John Galt said in a news release. Galt will continue in his post as head of the Bolton-based producer of injection molding equipment, hot runners, molds and integrated systems.
Through our partnership with Onex, Husky has focused its efforts to reduce waste, shed non-core and non-performing assets, and reinvested in better solutions and services to our core market customers, Galt said.
Under the Onex ownership, Husky stopped manufacturing large-tonnage presses for automotive and other large-part molding. Husky concentrated on smaller presses for its strongest area: thin-wall packaging and PET preforms, plus medical and consumer electronics.
Husky also exited the market for magnesium molding machines, and contracted out its parts distribution activities.
The changes cut costs and focused Husky on some recession-resistant markets.
Berkshire Partners and Omers Private Equity will each invest the same amount in the Husky purchase, according to Omers spokeswoman Lori McLeod.
Husky management will continue to hold a significant stake in the company through equity ownership. Although the respective future stakes of the owners were not disclosed, late last year Onex held 98 percent of Husky.
Husky is a compelling company with an exceptional management team, said Michael Ascione, managing director of Berkshire Partners of Boston. We believe Husky's global presence and strong customer value proposition enables many strategic growth initiatives and provides significant long-term potential.
Lisa Melchior, managing director of Omers Private Equity, called Husky a Canadian success story.
It is a global market leader in an industry that is poised to benefit from the growth in emerging markets, she said in a news release.
Press reports last year said Onex was looking at an initial public offering for Husky. That did not happen, and the sale comes just 31/2 years after Onex bought the plastics machinery company.
The deal, which is expected to close by early in the third quarter, brings a good payday. Onex's original purchase price of $1 billion included about $400 million in debt. Onex acquired Husky with an equity investment of about $622. After the $2.1 billion sale to Berkshire is completed, Onex will receive net proceeds of $1.8 billion after paying off the debt that remains.
Onex officials said that is a multiple of 2.9 times of invested capital and a 36 percent rate of return.
Financing for the purchase will be provided by affiliates of Goldman, Sachs & Co., RBC Capital Markets and TD Securities Inc. The latter firm acted as financial adviser.
Private equity deals are expected to be more numerous in 2011, according to a recent report by financial consultants Bain & Co. of Boston. More deals will be done and companies will realize higher returns, the report predicted.
Conditions are ripe for [merger and acquisition] activity, explained Bill Wood, economist with Mountaintop Economics and Research Inc. of Greenfield, Mass.
There is a lot of money on the sidelines, Wood said. The manufacturing sector seems to be on a favorable trend outperforming other sectors.
Anthony Munk, an Onex managing director, praised Galt and his management team. Husky's performance is a testament to our approach to identifying attractive businesses and partnering with exceptional management teams to improve operations, enhance profitability and build industry-leading companies, Munk said.
In just over three years, Husky's operating profit has more than doubled as a result of its successful transformation plan, he said. Munk called it an extraordinary accomplishment given the operating environment that the business faced since we acquired it in late 2007. That included a brutal recession that hammered spending on industrial machinery.
Husky generated 2010 sales of C$1.13 billion (US$1.1 billion), according to Onex's annual report.
Omers Private Equity of Toronto manages investments for the Omers pension fund. It has more than C$5.5 billion (US$5.8 million) of investments in North America and Europe. In its manufacturing portfolio are businesses in aftermarket vehicle components, retail shopping carts, bakery goods and railway security systems but it does not list plastics activities among its investments. Omers Private Equity is a long-term, patient investor, McLeod stated. Omers has more than 400,000 members representing most municipal workers in Ontario.
Berkshire Partners of Boston has invested in more than 100 midsized companies since the mid-1980s through seven investment funds with aggregate capital of US$6.5 billion. Although it doesn't list plastics in its current portfolio, its investments include retailing, consumer products, manufacturing, transportation, energy, business services and communications.
Onex manages about US$14 billion in investments focused on private equity, real estate and credit securities.