Onex raises initial $2bn for Fund VI as firm plans for leadership change

Onex held a first close for a sixth flagship buyout offering as founder Gerry Schwartz prepares to exit his role as chief executive.

This month, Onex Partners VI brought in an initial $2 billion, president Bobby Le Blanc said in a third-quarter earnings call. A second close is anticipated in early 2023.

The $2 billion banked owes mostly to a $1.5 billion commitment from Onex itself. The Toronto private equity firm, which has traditionally pledged large sums to its flagship offerings, intends to pony up as much as $2 billion.

Onex declined to specify Fund VI’s target. In September, Unquote reported that the goal is about $8 billion, citing senior managing director Nigel Wright as the source. Onex Partners V secured $7.15 billion in 2017.

Onex does not yet have a clear line of sight as to the timing of a final close. “This is a tough fundraising environment,” Le Blanc said. “And we expect this fundraise to be longer than what we have experienced with previous funds.” While several longstanding LPs signed on to the November close, he said, others “were just out of capacity in 2022.”

In the North American market, overallocated and cash-strapped LPs have been a major factor in recent declining levels of PE fundraising. Onex has until the first quarter of 2024 to wrap up Fund VI, Le Blanc noted.

Fund V’s LPs include Alaska Permanent Fund, California Public Employees’ Retirement System, California State Teachers’ Retirement System, Canada Pension Plan Investment Board, Massachusetts Pension Reserves Investment Management Board and New Jersey Division of Investment.

On the earnings call, Schwartz, who launched Onex in 1984, said he will step down as CEO following next year’s annual general meeting. His proposed replacement is Le Blanc, who joined in 1999 from Berkshire Hathaway and was named president in 2020.

Schwartz will remain active as founder and chairman, he said. In addition, he will be the sole owner of Onex’s multiple voting shares for five more years, subject to provisions to be approved by shareholders.

The Onex Partners platform, begun in 2003, has a strategy of making control investments in mid-to-large-cap companies operating in industrials, business services and software, healthcare and financial services. Opportunities are sourced in North America and Europe that require $200 million or more of initial equity.

ONCAP, an investor in lower mid-market businesses in North American consumer, industrials and services sectors, is another platform with a new flagship offering. ONCAP V, the target for which is unknown, is expected to hold a first close before the end of the year, Le Blanc said. ONCAP IV collected $1.1 billion in 2016.

Onex Transportation Partners is also set to raise initial commitments in next year’s first half, he said. The vehicle, unveiled this year to invest in transportation assets used for land, air, marine and industrial applications, marks Onex’s latest step in becoming a multi-strategy firm. Its target will correspond with the range of ONCAP funds.

Since inception, the firm has generated a 2.5x gross multiple, it reported, and a 27 percent gross IRR on realized, substantially realized and publicly-traded PE investments.