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Gold/Mining/Energy : Air Canada is taking off? -- Ignore unavailable to you. Want to Upgrade?

To: Stephen O who wrote (910)	10/13/1999 12:09:00 PM
From: Serge Collins	Read Replies (3) \| Respond to of 1033

There's a lot of noise coming out of Onex these days, and amidst the cacophony, investors have forgotten to take a close look at Onex to see what kind of company the would be suitor is. I have taken that look and must say I don't particularly like what I see. Let's call Onex what it is -- a leverage buyout company, and a holding company at that. Their balance sheet (if you're lucky enough to track it down) is nothing to brag about. It's a mountain of debt and Goodwill. The balance sheet for the most recent fiscal year-end shows Total Assets of $6.8 billion with Capital Assets of only $1 billion. A large part of the asset base is in the form of Goodwill, which was shown at more than $2 billion. LTD net of cash is about $1.1 billion. Both of these figures are most likely much higher now after the company borrowed another $930 million since the last year-end to make further acquisitions. In the absence of an up-to-date balance sheet, I would say that Goodwill is probably in excess of $2.5 billion and LTD at about $2 billion. I would recommend that investors have a look at Onex's financial statements at the Sedar site. Unfortunately, Onex does not include a balance sheet with its quarterly financial statements, which is unusual for a company of its size. They also do not consider the gain on the partial sale of a subsidiary (Sky Chefs) an extraordinary gain, so the earnings on the most recent quarterly statement are skewed somewhat. The most recent quarter showed earnings of $338 million, but $279 million of that came from the partial sale of Sky Chef. This tells me that they consider the sale of subsidiaries a normal part of business. Is this the sort of company you want buying Air Canada? Speaking of those recent earnings, they were actually pretty abysmal considering the relative good performance of Celestica and their automotive segments. Many of their segments are doing poorly which leads me to wonder why they would attempt to buy into a difficult industry like airlines when they are struggling to turn some of their companies around. In any event, I think the worshipping of Gerry Schwartz by the media is overdone and based on false assumptions. One of those assumptions is that he is some kind of management whiz. Let's not exaggerate, this guy is no Bill Gates. He hasn't built anything. What he has done is buy companies with other people's money (probably the little old lady who has her money in the bank paying 1% interest). If anything Schwartz reminds me more of James Ting (remember Semi-Tech) than he does Bill Gates or a Frank Stronach or a Frank Hasenfratz. Gerry Schwartz is Canada's Carl Icahn, a corporate raider with an ego bigger than a 747. Do we want another TWA? Remember when Icahn bought TWA in the mid 80s? Icahn said the same things about TWA that Schwartz is now saying about this merger -- that he will save the airline, he will turn things around, it will become a force to reckon with in the airline industry. Well everyone knows what happened to TWA.