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Onex sells 11 million shares in Celestica, but retains voting control

TORONTO - Canadian private equity firm Onex Corp. (TSX:OCX) is selling part of its stake in Celestica Inc. (TSX:CLS) for $113.3 million, but retaining control of the electronics manufacturing company.

TORONTO - Canadian private equity firm Onex Corp. (TSX:OCX) is selling part of its stake in Celestica Inc. (TSX:CLS) for $113.3 million, but retaining control of the electronics manufacturing company.

Onex said Tuesday it would sell 11 million subordinate voting shares of Celestica at $10.30 per share. After the deal closes on Oct. 14, Onex will hold an eight per cent economic interest, but will still control 69 per cent of the shareholder votes.

No one was available at Onex Tuesday to comment on the move, but there was no indication the firm was looking to divest its entire stake in Celestica.

Instead, the move may be an attempt by Onex to raise capital for one of its many private equity funds given the ongoing lack of readily available credit due to the financial crisis.

Although Celestica shares lost more than five per cent Tuesday after the announcement, the company's share price has improved dramatically from a low of $3.36 in March to close at $10 Tuesday.

Onex chairman and CEO Gerry Schwartz told analysts in August that Onex plans to scour the market for potential deals on distressed assets.

"Credit markets show signs of improvement, though credit for significant acquisitions is still very difficult to obtain," Schwartz said at the time.

Celestica spokeswoman Pam White said the sale was "all Onex's decision" and wouldn't comment further.

Celestica has long been a core holding and the largest publicly traded company controlled by Onex. It's likely the move will have little impact at Celestica, as Onex will retain its voting control.

Celestica, a manufacturing subsidiary of IBM that was spun off and later acquired by Onex, has fallen on hard times as the economic downturn sapped demand for its customers' products.

The company has a network of factories around the world that make electronics for brand-name companies.

In its most recent round of restructuring aimed at cutting unused manufacturing capacity, Celestica announced it would lay off 2,000 employees or almost six per cent of its workforce.

Celestica has been restructuring its operations almost continually and has laid off tens of thousands of people since 2001 - mostly in higher-cost countries in North America and Western Europe - as it closed factories and moved operations to lower-cost places.

Onex's businesses generate annual revenues of $33 billion, have assets of $40 billion and employ 211,000 people worldwide. The Onex companies operate in a variety of industries, including sugar production, manufacturing and real estate.

Onex often buys up distressed businesses, using its financial clout, connections and management expertise to restore them to health.

In Tuesday trading on the TSX, Onex shares fell 25 cents to $25, while Celestica dropped 53 cents to $10, a drop of more than five per cent.

 
 
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