Onex Raises Largest Canadian LBO Fund To Date –

In 1996, when Canada replaced all of its $1 paper bills with $1 coins, the Canadian dollar took on a new colloquial handle-the loonie-so named for the fish-eating bird depicted on the back of the coin.

Onex Corp., with the first close of its newest fund, appears to be a market leader when it comes to loonies, at least among Canadian buyout shops.

The publicly held firm held a first close on its Onex Partners LP, raking in $1 billion (or C$1.3 billion in loonies), and the Toronto-based firm is currently $600 million shy of its target, which Onex expects to reach during the first quarter of next year.

With a $1.6 billion target, the new fund will easily eclipse any rival funds ever raised by a Canadian firm.

Representatives from Onex declined comment for this story.

This latest fund represents the second investment fund from Onex, following up on the firm’s 2000-vintage ONCAP LP, a $400 million fund.

There is not expected to be any overlap between the two vehicles, as ONCAP focuses on small-cap investments below $65 million while Onex Partners LP is aimed at investments over $65 million.

According to the terms of the fund, Onex is slated to receive a 2% management fee on the committed capital from the limited partners.

If the $1.2 billion limited-partner target is met, the fee would come to $24 million a year.

Plus, as the fund’s general partner, Onex will receive a carried interest of 20% after the LPs take in their desired returns. Also, to get into the fund, LPs had to make a minimum commitment of 10 years.

While the fund will be used to make investments of over $65 million, Onex gave a range of between $100 million and $250 million for what it expects to be its typical equity investment.

Credit Suisse First Boston is the placement agent for the fund.

The first close of the fund arrives at a time when Onex has been actively involved in deals. Most recently, the buyout shop made news when it spun out its Canadian movie theater assets in a $175 million income-fund IPO. In November, Onex confirmed that its Loews Cineplex Entertainment Corp. was in preliminary discussions with AMC Entertainment about a potential merger.

Onex’s name has also bandied about in the Air Canada investment discussions. Earlier this year, the firm inked a deal to buy a stake in the airline’s frequent flier program although that deal collapsed when the carrier became insolvent.

Onex is expected to use the Onex Partners LP fund for a $103 million equity investment to gain control of Magellan Health Services, a mental health benefits provider. That deal, if it goes as planned, would be the first investment for the new vehicle.