CDPQ and KKR to acquire USI from Onex for US $4.3B

Caisse de dépôt et placement du Québec (CDPQ) and KKR & Co. L.P., together with employees of USI Insurance Services, have agreed to acquire USI from Onex Corporation (TSX: OCX) and Onex Partners III for an enterprise value of $4.3 billion (all figures in US dollars).

The transaction is expected to close during the second quarter of 2017 subject to customary closing conditions including regulatory approval.

The investment will primarily be made through a CDPQ pool fund managed by KKR and funds from KKR’s balance sheet. The CDPQ/KKR partnership is designed to pursue attractive investment opportunities in high quality businesses with a longer duration and a lower risk profile in order to support strong management teams and facilitate long-term strategic business building.

With more than 4,400 professionals operating out of 140 local offices throughout the United States, USI delivers property and casualty, employee benefits, personal risk and retirement solutions. USI has become an industry leader by leveraging the USI ONE Advantage® and attracting best-in-class industry talent with a long history of deep and continuing investment in local communities.

“CDPQ and KKR are co-leading this investment and leveraging their respective expertise in the sector to support USI’s world-class management as it pursues its strategic plan for long-term growth. Our partnership was established to implement both firms’ patient, disciplined and collaborative investment approach,” said Christian Puscasiu, Co-Head, Direct Investments, Private Equity at CDPQ. “USI operates in a resilient sector characterized by stable, long-term returns and serves small and medium-sized businesses, which are the cornerstone of the U.S. economy.”

“USI is a fantastic company and is uniquely positioned to help address the risk management, insurance and employee benefits-related needs of small and medium-sized business owners. We look forward to working with CDPQ to helping management achieve its long-term vision to grow the business through accelerated investments in USI’s people, technology and solutions,” said Tagar Olson, Head of KKR’s Financial Services investing practice. “Our successful experience in the insurance and benefits brokerage industry, coupled with the impressive track record of Mike Sicard and the USI management team, give us confidence in our ability to generate compelling returns while growing the business over the long term.”

“We are passionately committed to continuing and accelerating USI’s growth and investment as a leader in our industry, leveraging and innovating our unique USI ONE Advantage,” commented Michael J. Sicard, Chairman & CEO of USI. “We are excited to work with our new partners at CDPQ and KKR, and want to thank our partners at Onex for the tremendous support they provided to USI.”

“USI’s management team has done a terrific job establishing the company as a market leader with a differentiated value proposition,” said Bobby Le Blanc, a Senior Managing Director of Onex. “We’d like to thank Mike Sicard and the entire USI team for being great partners to Onex and its investors and wish them continued success in the future.”

In December 2012, Onex Partners III acquired USI for approximately $2.3 billion, including $610 million of equity from Onex Partners III, Onex and $92 million from USI employees.

Upon completion of the transaction, the Onex Group will have received proceeds of approximately $2.1 billion, including a prior distribution of $181 million in 2015. This results in a gross multiple of invested capital of 3.4 times and a 34% gross rate of return. Onex’ portion of the sale proceeds will be approximately $563 million, including carried interest of $65 million.

photo credit: USI

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.