COVER

CATCHING GERRY

$2 billion in deals amid the book war

Kimberley Noble February 26 2001
COVER

CATCHING GERRY

$2 billion in deals amid the book war

Kimberley Noble February 26 2001

CATCHING GERRY

COVER

$2 billion in deals amid the book war

Kimberley Noble

It’s a hectic time at Gerry Schwartz’s Toronto headquarters. Onex Corp. is pulling together a reasonably big deal. Not—as Bay Street’s Gerry-watchers keep waiting for—the deal of his life, colossal enough to make up for his failed attempts at buying Labatt or merging Air Canada and Canadian Airlines. But a pretty sizable realignment of the corporate landscape, nonetheless, even by the Gerry-watchers’ lofty standards.

For a month or more, as he and wife Fleather Reisman battled for control of Chapters Inc., Schwartz and two U.S. partners were quietly buying $575 million worth of Loews Cineplex Entertainment Corp. debt from discouraged creditors. Today, they’re on the brink of taking over the 3,000-screen movie theatre chain, one of North America’s largest. Fiollywood actor-producer Michael Douglas calls; he’s in Toronto for the day, and the two men agree to meet for lunch—in a fast-food place in Schwartz’s office building, so he can dash back upstairs if there’s a sudden development. “We’re inches away,” Schwartz says, holding up a thumb and forefinger.

He can afford to be patient. Not everyone likes Gerry Schwartz—his very success seems to grate on some Canadians. But to aficionados of his money-making skills, the Winnipeg-born lawyer-turned-financier is the best Canada has ever produced at the takeover game. He might lose one or two, but who cares? Everything else turns to gold. Or,

at the very least, turns a respectable profit. Take Loews Cineplex. Not many weeks ago, Schwartz was still eyeing only its Canadian subsidiary. Since then, he and his partners—Los Angeles billionaire Gary Winnick and Oaktree Capital Management, a big Loews Cineplex bondholder—have moved incredibly quickly. They’ve snapped up practically all the available debt of the parent firm. And that’s not all. When Loews Cineplex files for bankruptcy protection on Feb. 15, they have lined up an estimated $1.3 billion in new financing to replace roughly $2.1 billion in bonds and bank loans.

Talk about your pre-approved mortgage. This is how Schwartz usually does business: no fuss, no muss. All told, Onex has announced or finalized approximately $2 billion in business deals during the weeks in which the country scrutinized every twist and turn of Schwartz and Reisman’s $ 121-million private purchase of Chapters. Does this strike Schwartz as odd? “I found it—everybody around here found it—ironic,” he says, referring to the dozen or so financiers who work alongside him at Onex.

On the other hand, he’s used to it. At 59, Schwartz controls a $ 19-billion business that has made a fortune for shareholders by turning lacklustre operations into world leaders. Yet, with the exception of computer parts and

services provider Celestica, Onex’s subsidiaries tend to be companies few Canadians know—or care—much about. For example, deals put together during the Chapters takeover include the $594-million acquisition of defence-electronics maker BAE Systems Canada Inc. by the Onex-controlled partnership Oncap, plus several smaller and even more complicated transactions.

Whether or not it satisfied the Gerry-watchers, Loews Cineplex will be different. For once, Onex is buying a company the general public understands. On top of that, this marks the first time Schwartz has taken a company out of bankruptcy. Finally, Schwartz—who normally masterminds Onex’s takeovers and then delegates the operation to subordinates—plans to play an active role. While his wife overhauls the country’s bookstores, Schwartz says he wants to help reorganize its movie megaplexes. Two of his younger executives will run Loews, but the Onex chairman and CEO will join their team. Says Schwartz: “I will be a junior member.”

He looks forward to the challenge. “We can fix that company,” he says of Loews Cineplex. “We can build the most important theatre exhibition company in the world.” Beyond that, he says, he has few burning ambitions. As soon as they’re old enough, he’d like to take his three grandchildren on a great international advenmre. But first, he absolutely must go. It’s time to run downstairs and meet Michael Douglas for lunch. E3