Departure of Onex CEO Gerry Schwartz marks end of a dealmaking era

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‘His investment approach is a model for many, including the Canadian pension plans’

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Gerry Schwartz, a consummate Canadian dealmaker who came up in the go-go 1980s of leveraged buyouts and venture capital fame, announced Friday he would be stepping down as CEO of Onex Corp., the private equity firm he founded nearly 40 years ago.

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Just before the COVID-19 pandemic, Onex bought Calgary-based WestJet Airlines Ltd. in a $5-billion deal, including debt. Schwartz has been a player in many such high-profile deals since founding Onex in 1984, including the consolidation of the dairy industry and the multi-billion battle for telecom giant BCE Inc.

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The 80-year old’s retirement, to take effect after the company’s annual meeting in May, “marks a true generational shift in the Canadian investment landscape,” said Mark Wiseman, chairman of Alberta Investment Management Corp., who added that the multi-billion dealmaking done regularly by Canada’s largest pension funds was learned at the feet of Schwartz and Onex.

“His investment approach is a model for many, including the Canadian pension plans,” said Wiseman, who spent four years years as CEO of the Canada Pension Plan Investment Board.

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He called Schwartz one of Canada’s most accomplished investors, who built Onex into a pre-eminent North American private equity firm.

After a stint in investment banking on Wall Street, Schwartz came up alongside well-known figures in the leveraged buyouts (LBO) and venture world such as Henry Kravis, co-founder of KKR & Co. Inc., and The Blackstone Group co-founder and chairman Stephen Schwarzman.

It may have seemed an unlikely trajectory for someone born and raised in Winnipeg, where Schwartz attended university and then law school before heading to business school at Harvard, where he earned an MBA.

But Schwartz was always entrepreneurial and his Winnipeg days in the 1970s included an early partnership with Izzy Asper in what would become the CanWest Global Communications Corp.

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After law school, Schwartz worked briefly as a tax lawyer before heading to Harvard and ultimately a job in mergers and acquisitions at Bear Stearns & Co. in New York, where he would meet and work alongside some of the eventual titans of the buyout world.

In the 1980s, Onex made a name for itself buying companies including Beatrice Foods, one of the largest and most-profitable food processing companies, and Sky Chefs, which was the world’s largest in-flight caterer and served most major airlines. In the 1990s, Onex bought IBM Canada subsidiary Celestica, a global provider of electronics manufacturing services.

Schwartz’s Toronto-based buyout firm was busy making high-profile private equity deals for years before Canada’s large pensions got into the action of direct investing. Prior to that, CPPIB and others such as the Ontario Teachers’ Pension Plan invested mostly in stocks and bonds and got exposure to a more diverse portfolio only through investing in funds run by firms like Onex.

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Dealmaking chops

As they began to develop dealmaking chops of their own, they became partners with Onex in buyouts, and often competitors for deals, while maintaining investments through Onex funds.

“A great example was the Bell Canada (BCE Inc.) deal in 2007, where Onex teamed up with CPPIB and KKR to make a bid to take the company private,” recalled Wiseman, who was the Canadian pension’s senior vice-president of private investments at the time.

“Led by Gerry, they were fantastic and well-aligned partners in that deal.”

A crucial moment was when the Onex-KKR-CPPIB suitors were outbid by rivals from Teachers and Providence Equity Partners Inc. in a transaction that ultimately failed to be consummated.

“Six months after they secured it, it fell apart. We benefited from our discipline,” said Wiseman, who described Schwartz as “unemotional at all times” in the dealmaking process.

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“Gerry was always disciplined. He never ‘had’ to do a deal,” Wiseman said.

A profile on describes the first few years of Onex as bare bones, with Schwartz working in a borrowed windowless office with only an assistant and secretary as he sought to raise money and find companies he could buy, fix up and sell.

In May, he will step back from his role as CEO of what is now a firm with around US$47 billion under management.

On a conference call with analysts Friday, Onex officials said details about his ongoing role with the firm will be discussed after investors are briefed on a plan that would allow him to retain control over the company’s multiple-voting shares when he leaves the CEO job.

The company’s 2021 information circular said Schwartz indirectly held all the outstanding multiple voting shares of the corporation, and owned or controlled about 13.2 per cent of the outstanding subordinated voting shares. The revised share structure arrangement, if approved by shareholders, would be subject to review after five years.

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Schwartz has been married to Heather Reisman, founder and CEO of Indigo Books and Music, since 1982. A Maclean’s article in 2013 said the pair met in Montreal when Schwartz was looking into buying a distillery and Reisman was advising the liquor concern’s bank.

The couple is perhaps nearly as well known for their philanthropy as their business ventures.

Through the Gerald Schwartz & Heather Reisman Foundation, they made the largest gift in the University of Toronto’s history in 2019, donating $100 million to help build a 750,000-square-foot complex to anchor U of T ’s cluster of artificial intelligence scientists and biomedical experts.

The couple has also donated $28 million over the years to Mount Sinai Hospital in Toronto.

“He has led the way in taking his self-made earnings and reinvesting them in philanthropic endeavours, with the same laser focus that he puts on his buyouts,” Wiseman said.

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