Gerry Schwartz, chief executive officer of Onex Corp. (Galit Rodan/Getty)
Canadian private equity firm Onex Corp is leading a group of investors in the purchase of insurance claims provider York Risk Services Group Inc. from ABRY Partners LLC for $1.33 billion, expanding its assets in its insurance business.
The group consists of Onex Partners III, a fund managed by Onex, as well as certain limited partners, including Onex, as coinvestors and York’s management team.
As part of the deal, the group would make an equity investment of $560 million and use fresh debt to subsidize the rest of the purchase price. According to The Wall Street Journal, Onex’s investment is estimated to reach about $260 million when the deal closes but will ultimately drop as coinvestors kick in more money toward the purchase.
The deal is expected to close in the third quarter and is subject to regulatory approval.
Boston-based private equity firm ABRY turned to Kirkland & Ellis for legal representation on the transaction while Onex, Canada’s largest buyout firm, sought counsel from Fried, Frank, Harris, Shriver & Jacobson.
ABRY had been looking to sell New Jersey-based York for more than $1.5 billion earlier in May. However, Onex senior managing director Robert Le Blanc told Bloomberg that the $1.33 billion deal was at a “full and fair price.”
York is a leading provider of insurance solutions to property, casualty and workers’ compensation specialty markets in the U.S. It also helped deal with claims for major hurricanes striking the country in the past 40 years. The company has 3,800 employees serving more than 6,300 clients through 75 offices.
The recurring revenue of Onex’s insurance business during the financial crisis gave the company confidence in the acquisition of York. Blanc told Bloomberg that York’s “unbelievably strong, organic growth prospects” would provide more momentum for Onex’s future growth.
Blanc also noted in a statement that York’s management team, headed by CEO Rick Taketa, was another big motivator for the acquisition. Taketa will continue to lead York once the deal is completed.
“We are excited to partner with Rick and his team to continue York’s impressive track record of growth both organically and through strategic acquisitions,” Blanc said.
Reuters reports that ABRY, which bought its majority equity interest in York from Odyssey Investment Partners in December 2010, had been in advanced talks with Onex earlier this month.
The deal is Onex’s first major acquisition in 2014. Two years earlier, Onex bought USI Insurance Services LLC, which acquired about 40 insurance brokerage and consulting offices from Wells Fargo & Co this year, for $2.3 billion. Earlier this year, Onex sold $6.9 billion of its holdings in Blackstone Group and TPG Capital while its asset prices were rising, giving it an estimated cash balance of $2.4 billion after buying York.
Advising ABRY on the deal is Kirkland & Ellis, with a team that includes corporate partners Joshua Kogan and Armand Della Monica, debt finance partners Ashley Gregory and David Tarr, tax partner Kevin Treesh, capital markets partner Michael Kim, intellectual property partner Edward Sadtler, employee benefits partner Alexandra Mihalas, executive compensation partner Dean Bachus, environmental partner Toby Chun, international trade partner Laura Fraedrich and antitrust partner Ian Conner.
Associates involved in the deal include Brandon Charnas, Elizabeth Freechack, Andrew Glickman, Rebecca Guzman, Adi Herman, Ed Holzwanger, Alena Jirovska, Chase Kaniecki, Sarah Kregor, David Lee, Maryam Mujahid, Joe Nord, Jennifer Sheehan and Kevin Zaragoza.
Kirkland & Ellis has a long-standing relationship with ABRY. Both Monica and Kogan also led the firm’s team that worked on ABRY’s $1.36 billion sale of Atlantic Broadband to Cogeco Cable in 2012.
Fried Frank’s team representing Onex includes corporate partners Daniel Bursky and Christopher Ewan, executive compensation and employee benefits partner Jeffrey Ross, intellectual property and technology partner Henry Lebowitz, litigation partner Peter Simmons and tax partner Alan Kaden.