TPG has signed an agreement to acquire The Warranty Group, a provider of warranty services and related programs, from Onex Corporation at an enterprise value of approximately $1.5 billion. The transaction is expected to close in the third quarter of 2014.
The Warranty Group (TWG) is a global provider of warranty services and related benefits. Through the Virginia Surety Company and London General Insurance (both wholly-owned insurance subsidiaries of TWG) the company provides underwriting, claims administration, and marketing expertise to manufacturers, distributors, and retailers of consumer goods including automobiles, homes, consumer appliances, electronics, and furniture, as well as specialty insurance products and services for financial institutions. The company has approximately 1,800 employees and is headquartered in Chicago with operations in more than 35 countries (www.thewarrantygroup.com).
The Onex Group made a $498 million equity investment in TWG in November 2006. Upon completion of the transaction, the Onex Group will have received proceeds of approximately $1.5 billion, including prior distributions of $403 million, which will result in a multiple of invested capital of approximately 3.1 times and an 18% rate of return. Onex’ portion of the proceeds would be approximately $385 million, including carried interest.
Onex Corporation makes private equity investments through the Onex Partners and the ONCAP families of funds. Onex has more than $16 billion of assets under management and is based in Toronto with additional offices in New York and London (www.onex.com).
“This is a very good outcome for Onex’ shareholders and our limited partners,” said Bobby Le Blanc, a Senior Managing Director of Onex. “TWG’s performance is a testament to our approach of identifying attractive carve-out opportunities and partnering with management teams to build industry-leading businesses and improve operational efficiency on a standalone basis.”
TPG is a private investment firm founded in 1992 with approximately $59 billion of assets under management. Sectors of interest include industrials, retail, consumer, financial services, travel and entertainment, technology, media and communications, and healthcare. TPG makes investments throughout North America, Europe, Asia and Australia. The firm has offices in San Francisco, Fort Worth, Austin, Beijing, Chongqing, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, São Paulo, Shanghai, Singapore and Tokyo (www.tpg.com).
“As the worldwide leader in full service underwriting and administration of extended warranties, and with its unique business model, The Warranty Group is well positioned to take advantage of current and future market trends,” said Eric Leathers, Managing Director at TPG. “Tom Warsop and his team have done a great job building the business, and we believe with our additional capital, operational expertise and global relationships, we can accelerate the company’s growth.”
J.P. Morgan Securities served as the sole M&A advisor and Skadden, Arps, Slate, Meagher & Flom served as outside counsel for TPG. Goldman Sachs & Co., Morgan Stanley & Co., and Citigroup Global Markets acted as financial advisors, and Kaye Scholer served as outside counsel for The Warranty Group and Onex.
© 2014 PEPD • Private Equity’s Leading News Magazine • 3-21-14
