Onex Hands Control of Private Credit Unit Falcon Back to Its Managers

(Bloomberg) -- Onex Corp. has jettisoned a majority stake in a private credit firm it bought less than four years ago, the latest move by the Canadian asset manager to cut costs and simplify the business under a new chief executive officer.

The firm agreed to the “separation” of Onex Falcon as an independent entity, though it will keep a 20% stake along with future carried interest participation, according to a statement Thursday. Falcon’s managing partners will own the remaining 80%. 

It was an acquisition that didn’t work. “The synergies across the remainder of our platforms did not materialize to the extent that the Onex resources needed to support the business outweighed the benefits,” CEO Bobby Le Blanc told analysts during the second-quarter conference call. 

Onex bought Boston-based Falcon Investment Advisors in December 2020 to expand its credit platform and boost its capabilities in mezzanine debt. But the deal didn’t play out as planned. Mezzanine loans — which are lower in a company’s capital structure than senior debt — are more like a private equity product than a credit product, Le Blanc said.

“It didn’t really fit in well with the credit platform and the fundraising around the credit platform,” he said. Onex Credit lost about $3 billion in assets under management with the Falcon split, bringing the unit to about $22 billion. 

Jason New, the co-CEO of Onex Credit at the time of the acquisition, left the Canadian firm the following year. 

Onex also said Thursday that its new short-term buyout fund, Onex Partners Opportunities Fund, has gathered $820 million so far, including $400 million from the company itself. 

Shares of Onex declined for the eighth consecutive trading day, falling 0.3% to close at C$87.64 in Toronto. 

(Updates with assets under management for Falcon and Onex’s credit unit and closing share price.)

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