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By the end of 2025, Onex Corp. expects to increase its investing capital by a compound rate of 14 to 16 per cent annually, and raise its annual earnings from fees to $55-million, the company said at an investor presentation on Thursday.Nathan Denette/The Canadian Press

Onex Corp. ONEX-T is setting new targets to boost the underlying value of its assets over the next two years but is tempering investors’ expectations as the private equity and credit firm faces a period of transition and tough market conditions.

By the end of 2025, Onex expects to increase its investing capital by a compound rate of 14 to 16 per cent annually, and raise its annual earnings from fees to $55-million, the company said at an investor presentation on Thursday. That would boost its investing capital to about $185 per share, from $130 currently, not including anticipated share buybacks.

Onex announced the new targets after it conceded it will fall short of previous targets for 2026 set out at a 2021 investor day. Since then, Onex has run into severe fundraising challenges, wound up its Gluskin Sheff private wealth business and cut back its expenses. If it meets the new targets, the value of its investing capital would increase at a rate that is comparable to or slightly better than its performance over the last five years, according to chief financial officer Chris Govan.

But the path to get there likely won’t be smooth. “We have our fair share of challenges as well,” chief executive officer Bobby Le Blanc said.

The fundraising prospects for what he called “larger-cap” private equity firms such as Onex are “the most difficult the industry’s ever seen,” he said. “We got caught in a bad part of the fundraising cycle and have had to contend with the knock-on effects.”

Nigel Wright, senior managing partner for flagship private equity fund Onex Partners, said there are “an enormous number of broken deals” in the current market because buyers and sellers are unable to agree on what companies are worth.

The headwinds for Onex have been compounded by a cash crunch among large institutional investors such as pension funds. Private equity investors have put far more money into new investments than they have recovered from asset sales in recent years – though Mr. Wright said Onex Partners has done the opposite over the last year.

With private equity under pressure, Onex reaffirmed its commitment to its $26-billion credit business, which originates various forms of private credit such as collateralized loan obligations and direct loans.

Mr. Le Blanc said it “is on the cusp of scalability and earnings growth” and has the potential to grow “for years to come.” The credit strategy is a key plank in an attempt to raise the value shareholders ascribe to the company by generating a steadier stream of earnings from fees.

In recent months, Onex has sold assets to free up liquidity and return money to investors, bought back shares aggressively and cut its costs – including shedding jobs. And still, “there’s a lot on our to-do list,” Mr. Le Blanc said.

Onex is still working to bring down its expenses. It is building out a newly formed business line, Onex Transportation Partners, to pursue private equity buyouts in transportation infrastructure with an emphasis on the transition to a green economy. And it is open to making acquisitions, especially if it adds consistent earnings from fees. But Mr. Le Blanc cautioned that “M&A is rarely a magic bullet.”

Since he was named CEO in May, when Onex started a three-year countdown until the expiry of the multiple voting shares through which founder and former CEO Gerry Schwartz controls the company, Mr. Le Blanc has been trying to show investors that Onex is creating a more accountable governance model. He assured investors that “management has full autonomy,” and said executive pay will be tied more closely to specific goals.

At Thursday’s presentation, Onex also revived a familiar refrain, asserting that the gap between its share price and what the company believes is its intrinsic value – a gulf it pegged at 59 per cent – is excessive.

“It bothers us a lot,” Mr. Wright said, describing its process for valuing assets as “fair and right.”

“We’re very comfortable with being judged on the hard facts over time,” he said.

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