Toronto-based Onex Corporation has agreed to sell The Warranty Group to TPG for $1.5 billion, generating a 3.1x return multiple, according to a statement.
The sale is expected to close in the third quarter and will generate an 18 percent net internal rate of return.
The Warranty Group administers extended warranties and credit insurance to consumer goods manufacturers and retailers. Onex initially acquired The Warranty Group for $710 million from insurance broker Aon in November 2006. The firm invested a total of $498 million in equity from its private equity arm Onex Partners’ first two funds, which raised $1.65 billion in 2003 and $3.45 billion in 2006 respectively.
Goldman Sachs & Company, Morgan Stanley & Company and Citigroup Global Markets acted as financial advisors. Kaye Scholer provided counsel for Onex.
TPG declined to comment.
The divestment comes as Onex is seeking $4.5 billion for Onex Partners IV, which had collected $3.6 billion at the end of February. Onex will commit about $1.2 billion to the fund, while members of the investment team will personally commit between 2 and 8 percent of the fund—potentially as much as $400 million—Private Equity International reported Thursday. Fund IV has a $5 billion hard-cap.
Onex has $19 billion of assets under management. The firm also manages its mid-market ONCAP funds, as well as credit and real estate funds.