Onex inks $2.3bn insurance buyout

The firm has sealed its third and largest investment of 2012 by investing $700m in insurance broker USI.

Onex Corporation will buy US insurance brokerage services company USI for $2.3 billion.

USI provides property insurance, casualty insurance, employee benefits and retirement consulting services and is one of the 10 largest insurance brokers in the US, according to a statement. Onex will invest approximately $700 million of equity from its $4.7 billion third fund, Onex Partners III, of which Onex’ share is about $175 million as a limited partner in the fund. The transaction is expected to close before the end of 2012.

“[USI] is well positioned to continue to grow both organically and by building on its track record of successful acquisitions,” Onex managing director Robert Le Blanc said in the statement.

The firm was unavailable for comment at press time.

Prior to investing in USI, Onex’s third fund was approximately 60 percent invested. The firm typically commits a significant amount of capital into its own funds, and first committed $800 million of its own capital to Fund III before increasing the amount to $1.2 billion.

USI marks Onex’s third announced acquisition of 2012. In September, the firm invested €568 million in KraussMaffei, a German manufacturer of machinery for processing plastics, and $813 million in graphics services company SGS International.

While Onex invests in bigger deals than the vast majority of Canadian general partners, the larger pension plans in Canada have continued to invest directly in multiple large-scale transactions in 2012. The Canada Pension Plan Investment Board purchased the Air Distribution division of UK engineering company Tomkins for about $1.1 billion in September, and invested in US cable operator Suddenlink Communications in a deal valued at $6.6 billion in July, including the assumption of debt. 

Meanwhile, rival investor The Ontario Teachers’ Pension Plan acquired Canadian data centre operator Q9 Networks for C$1.1 billion in June. Both the Suddenlink and Q9 transactions involved GPs investing alongside the Canadian pensions, as BC Partners invested alongside CPPIB in Suddenlink, while Providence Equity Partners and Madison Dearborn partnered with OTPP in the Q9 deal.

Toronto-based Onex manages private equity, real estate and credit securities investments, managing approximately C$14 billion (€10.8 billion, $13.7 billion) of which C$10 billion is third-party capital.