Onex founder Gerry Schwartz addresses shareholders during their annual general meeting in Toronto.J.P. Moczulski/The Canadian Press
Private equity pioneer Gerry Schwartz plans to hand chief executive responsibilities at Onex Corp. ONEX-T to president Bobby Le Blanc next spring while remaining chair of the US$47-billion asset manager, as long as shareholders approve an extension of a dual-share structure that enables Mr. Schwartz to control the company.
Mr. Schwartz launched Onex in 1984 and became a billionaire as the Toronto-based company led a series of successful leveraged buyouts. He laid out succession plans on Friday when the company released financial results. The CEO in waiting, Mr. Le Blanc, joined Onex 23 years ago from Berkshire Hathaway Inc. and became president in 2020.
In upbeat remarks on a conference call Friday, the 80-year-old Mr. Schwartz had only this to say about his decades at the company: “When Onex was created nearly 40 years ago, it was built to perform consistently and in a wide range of market conditions.”
Against the current backdrop of rising interest rates and recession fears, Mr. Schwartz said Onex will “convert market dislocations into moments of opportunity” by investing its US$1.3-billion of cash and its clients’ funds.
“To ensure continuity and a strong path for growth and success ... it is my pleasure, and I really mean a pleasure, to announce our proposal to appoint Bobby Le Blanc as chief executive officer,” Mr. Schwartz said. The appointment would be formalized with a shareholder vote at Onex’s annual meeting in May.
“As founder and chairman, I will certainly continue to remain involved with Onex and work with Bobby to be part of our growth,” he added.
Mr. Schwartz controls Onex by owning voting shares that will expire when he steps down as CEO. His stake in the company, including investments in businesses Onex owns, is worth approximately US$1.1-billion, based on recent filings.
As part of Onex’s succession plan, the company is asking shareholders to extend the dual-share structure by five years. If investors turn down the extension, Mr. Schwartz will remain CEO. On Friday, Onex’s board recommended shareholders approve the proposal at May’s meeting.
“We do not believe the CEO succession news should have an impact on Onex’s share price as we expected and we think investors expected Bobby Le Blanc to be named CEO when Gerry Schwartz eventually stepped away from that position,” analyst Geoffrey Kwan at RBC Capital Markets said in a report.
Onex’s peers in private equity have also appointed new operational leaders in recent years while their founders remained engaged in the business. For example, KKR & Co. co-founders Henry Kravis and George Roberts stepped down as co-CEOs last year to become co-executive chairs of the New York-based asset manager. The pair worked with Mr. Schwartz as investment bankers in the 1970s before the trio launched some of the first leveraged buyout funds.
On Friday, Onex reported a US$180-million loss in the most recent quarter, reflecting a 2-per-cent decline in the value of its private equity holdings, compared with a US$602-million profit in the same period last year. The Toronto-based company is currently raising several new private equity and credit funds, all of which are expected to close by early in 2024. Mr. Le Blanc said during Friday’s call that the current fundraising environment is “challenging” because of economic and geopolitical uncertainty.
In November, Onex held a US$2-billion first close on its next flagship private equity fund, the company’s sixth. Onex’s last flagship fund raised US$7.15-billion and closed in 2017. Mr. Le Blanc said that the 2017 fund has top quartile results and still has the capital to make up to two significant investments before being fully committed.
In the past decade, Onex broadened the range of products it offers to institutions and high-net-worth individuals by launching credit funds and acquiring wealth manager Gluskin Sheff & Associates.