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No Holds Barred: Schwartz Takes Onex to the Top

Article Overview: In 1983, Schwartz founded Onex with one single mission at hand: to search for and acquire under-managed and undervalued companies, streamline their operations, and sell the acquisitions for a profit after their asset bases had been added to. Early on, Schwartz focused on purchasing such big name companies as Purolator Courier Ltd., an in-flight catering company called Sky Chefs Inc., and Beatrice Foods. He sought to acquaint himself with companies that already had a recognized brand name that he could draw upon.

No Holds Barred: Schwartz Takes Onex to the Top

In 1983, Schwartz founded Onex with one single mission at hand: to search for and acquire under-managed and undervalued companies, streamline their operations, and sell the acquisitions for a profit after their asset bases had been added to. Early on, Schwartz focused on purchasing such big name companies as Purolator Courier Ltd., an in-flight catering company called Sky Chefs Inc., and Beatrice Foods. He sought to acquaint himself with companies that already had a recognized brand name that he could draw upon.

After four years, Onex went public in a sale that raised $246 million. Schwartz, however, kept control over 60 percent of the company. By that time, he had already acquired five companies for $1.3 billion. Everything was smooth sailing for Schwartz until the early 1990s, when a general recession hit the country. Shareholders began to question the large stock dividends that Schwartz was gaining from the company. What began as a share price of $20.50, dropped to $4.75 in 1990. As a result, Schwartz was forced to sell off many of his acquisitions, including Beatrice Foods. Although he made a profit on some, many were sold below cost.

Schwartz decided to change the company’s compensation system for executives, and soon Onex was bouncing back. At the time, Schwartz told his shareholders, “I don’t feel much need to prove anything to anybody. I think Onex will speak for itself.” Some of its previous acquisitions, including Sky Chefs and Burger King, began to pay off. As the country’s overall economy regained its strength, so too did Onex, and at a much faster rate.

After the rebound, Schwartz gained a reputation as the go to guy for a company that wanted to increase its shareholder value. Many of his next acquisitions would be good decisions, including Cineplex, ClientLogic, Qantas, and Celestica. Two attempted deals, however, would thrust Schwartz back into the media spotlight.

In 1995, Schwartz lost his hostile bid of $2.3 billion to buyout John Labatt Ltd., a popular brewer in the North American market. Four years later, his attempt to acquire and merge Canada’s two largest airlines was not received well in the media. In the end, a Quebec judge ruled the bid illegal at the last minute, and Schwartz was left to lick his wounds.

Today, Schwartz explains, “Onex is a holding company and takes an active role in the strategic and financial direction of its subsidiaries. Our goal has always been to build individual subsidiaries into a position of being number one or two in market share in the world, or at least in their niche.”

Onex maintains two distinct branches of its company, one a traditional side that is comprised of such business as Lantic Sugar, a sugar refining business. The other is composed of more modern, technological companies. “The digital revolution and e-commerce are just in their infancy,” says Schwartz, “and we’ve been trying to find ways to put our hook into that rocket ship as it goes up.”

For all of his achievement, Schwartz was named Ernst & Young’s 2005 Entrepreneur of the Year. He was also made an Officer of the Order of Canada in 2006. When he’s not acting as Onex CEO or serving as a director of Scotiabank, Schwarz keeps busy reading one book a week, playing tennis and pool, and sailing. “I enjoy the independence of single-handling a boat,” he says. “I like controlling the elements, making the wind and the waves and the water work for me.”

Related Articles
  Lesson #1: A Company Is Only As Strong As The Team Behind It
  Canada’s Billionaire Businessman: How Schwartz Made Onex a Success
  Lesson #5: Pride Can Power Your Company
  Lesson #3: Create Long-Term Value For Your Shareholders
  Lesson #2: Know When to Hold ‘Em and Know When to Fold ‘Em

Article Tags: acquisitions, beatrice foods, burger king, catering company, celestica, cineplex, clientlogic, compensation system, flight catering, hostile bid, media spotlight, onex, purolator courier ltd, qantas, recession, share price, shareholder value, sky chefs, smooth sailing, stock dividends



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