Edgar Filing: MAGELLAN HOLDINGS LP

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934

MAGELLAN HEALTH SERVICES, INC.
(Name of Issuer)

ORDINARY COMMON SHARES
(Title of Class of Securities)

CUSIP No. 559079207
(CUSIP Number)

ONEX CORPORATION
CANADA TRUST TOWER
161 BAY STREET - 49TH FLOOR
TORONTO, CANADA M5J 2S1 CANADA
ATTENTION: EWOUT R. HEERSINK
(416) 362-7711

(Name, Address and Telephone
Number of Person Authorized
to Receive Notices and
Communications)

COPIES TO:

JOEL I. GREENBERG, ESQ.
KAYE SCHOLER LLP
425 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 836-8000

JANUARY 5, 2004

(Date of Event Which
Requires Filing of This
Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].

Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.

*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).

SCHEDULE 13D

------------------- ------------------
CUSIP NO. 559079207 PAGE 2 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1. Magellan Holdings LP
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2.
--------------------------------------------------------------------------------
SEC USE ONLY
3.
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

4. WC
--------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
5.
--------------------------------------------------------------------------------

CITIZENSHIP OR PLACE OF ORGANIZATION

6. Delaware
--------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
--------------------------------------------------------------
SHARED VOTING POWER

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of Multiple and Variable Vote
Restricted Convertible Common Stock ("MV Common Stock")
of the Issuer. See Row 13 below for a description of
8. the voting power of such shares.
NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY --------------------------------------------------------------
EACH SHARED DISPOSITIVE POWER
REPORTING 8,332,726 shares of Ordinary Common Stock issuable
PERSON upon conversion of shares of MV
WITH 10. Common Stock of the Issuer.
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
12.
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

14. PN
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
--------------------------------------------------------------------------------

SCHEDULE 13D

------------------- ------------------
CUSIP NO. 559079207 PAGE 3 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1. Onex Partners LP
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2.
--------------------------------------------------------------------------------
SEC USE ONLY
3.
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

4. AF
--------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
5.
--------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of MV Common Stock of the Issuer.
See Row 13 below for a description of the voting power
8. of such shares.
NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY --------------------------------------------------------------
EACH SHARED DISPOSITIVE POWER
REPORTING 8,332,726 shares of Ordinary Common Stock issuable upon
PERSON conversion of shares of MV Common Stock of the Issuer.
WITH 10.
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
12.
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

SCHEDULE 13D

------------------- ------------------
CUSIP NO. 559079207 PAGE 4 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1. Onex Partners GP LP
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2.
--------------------------------------------------------------------------------
SEC USE ONLY
3.
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of MV Common Stock of the Issuer.
See Row 13 below for a description of the voting power
8. of such shares.
NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY --------------------------------------------------------------
EACH SHARED DISPOSITIVE POWER
REPORTING 8,332,726 shares of Ordinary Common Stock issuable
PERSON upon conversion of shares of MV Common Stock of the
WITH 10. Issuer.
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
12.
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

Page 4 of 29 Pages

SCHEDULE 13D

------------------- ------------------
CUSIP NO. 559079207 PAGE 5 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1. Onex Partners GP Inc.
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2.
--------------------------------------------------------------------------------
SEC USE ONLY
3.
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of MV Common Stock of the Issuer.
See Row 13 below for a description of the voting power
8. of such shares.
NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY --------------------------------------------------------------
EACH SHARED DISPOSITIVE POWER
REPORTING 8,332,726 shares of Ordinary Common Stock issuable
PERSON upon conversion of shares of MV Common Stock of the
WITH 10. Issuer.
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
12.
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

14. CO
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
--------------------------------------------------------------------------------

Page 5 of 29 Pages

SCHEDULE 13D

------------------- ------------------
CUSIP NO. 559079207 PAGE 6 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1 Onex Corporation
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2
--------------------------------------------------------------------------------
SEC USE ONLY
3
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

4 AF
--------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
5
--------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION

6 Ontario, Canada
--------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
--------------------------------------------------------------
SHARED VOTING POWER

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of MV Common Stock of the Issuer.
See Row 13 below for a description of the voting power
8. of such shares.
NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY --------------------------------------------------------------
EACH SHARED DISPOSITIVE POWER
REPORTING 8,332,726 shares of Ordinary Common Stock issuable
PERSON upon conversion of shares of MV Common Stock of the
WITH 10. Issuer.
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.
--------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
12.
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

14 CO
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
--------------------------------------------------------------------------------

Page 6 of 29 Pages

SCHEDULE 13D
------------------- ------------------
CUSIP NO. 559079207 PAGE 7 OF 29 PAGES
------------------- ------------------

--------------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

1. Gerald W. Schwartz
--------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
2.
--------------------------------------------------------------------------------
SEC USE ONLY
3.
--------------------------------------------------------------------------------
SOURCE OF FUNDS*

6. Canada
--------------------------------------------------------------------------------
7. SOLE VOTING POWER
-0-
--------------------------------------------------------------
SHARED VOTING POWER

8,332,726 shares of Ordinary Common Stock issuable upon
conversion of shares of MV Common Stock of the Issuer.
See Row 13 below for a description of the voting power
8. of such shares.

NUMBER OF --------------------------------------------------------------
SHARES SOLE DISPOSITIVE POWER
BENEFICIALLY 9. -0-
OWNED BY EACH --------------------------------------------------------------
REPORTING SHARED DISPOSITIVE POWER
PERSON 10.
WITH
--------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,332,726 shares of Ordinary Common Stock issuable upon
11. conversion of shares of MV Common Stock of the Issuer.**
-------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12. CERTAIN SHARES* [ ]
--------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.6% of the Issuer's shares of Ordinary Common Stock,
assuming conversion of all of the Reporting Person's
shares of MV Common Stock into Ordinary Common Stock
(assuming 26,982,854 shares of Ordinary Common Stock
outstanding). Such shares of MV Common Stock entitle the
Reporting Person to elect four (4) of nine (9)
members of the Issuer's Board of Directors (of the
remaining five (5) directors, two (2) are elected by
the MV Common Stock and Ordinary Common Stock voting
together and three (3) are elected by the Ordinary
Common Stock) and to 50% of the voting power of the MV
Common Stock and Ordinary Common Stock voting together as
13. a single class.
--------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*

14. IN
--------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.

**Gerald W. Schwartz expressly disclaims beneficial ownership
of the shares of Magellan Health Services, Inc. beneficially
owned by Magellan Holdings LP, Onex Partners LP,
Onex Partners GP LP, Onex Partners GP Inc. and Onex Corporation.

--------------------------------------------------------------------------------

Page 7 of 29 Pages

Item 1. Security and Issuer.

The securities to which this Statement on Schedule 13D relates
are the shares of Ordinary Common Stock , par value $0.01 per share ("Ordinary
Common Stock"), of Magellan Health Services, Inc., a Delaware corporation (the
"Issuer"). The principal executive office of the Issuer is located at 6950
Columbia Gateway Drive, Suite 400, Columbia, Maryland 21046.

Item 2. Identity and Background.

(a), (b), (c) and (f). This Statement on Schedule 13D is being
filed by Magellan Holdings LP, a Delaware limited partnership ("Holdings"), Onex
Partners LP, a Delaware limited partnership ("Partners"), Onex Partners GP LP, a
Delaware limited partnership ("Partners GP LP"), Onex Partners GP Inc., a
Delaware corporation ("Partners GP"), Onex Corporation, an Ontario corporation
("Onex"), and Mr. Gerald W. Schwartz ("Mr. Schwartz").

Holdings

Holdings is a Delaware limited partnership. Holdings is a
holding company through which the other Reporting Persons hold securities of the
Issuer. The address of the principal business and principal offices of Holdings
is c/o Onex Investment Corp., 712 Fifth Avenue, New York, NY 10019. The general
partner of Holdings is Partners.

Partners

Partners is a Delaware limited partnership. Partners'
principal business is investing in securities. The address of the principal
business and principal offices of Partners is c/o Onex Investment Corp., 712
Fifth Avenue, New York, NY 10019. The general partner of Partners is Partners GP
LP.

Partners GP LP

Partners GP LP is a Delaware limited partnership. Partners GP
LP's principal business is being the general partner of Partners. The address of
the principal business and principal offices of Partners GP LP is c/o Onex
Investment Corp., 712 Fifth Avenue, New York, NY 10019. The general partner of
Partners GP LP is Partners GP.

Partners GP

Partners GP is a Delaware corporation. Partners GP's principal
business is being the general partner of Partners GP LP. The address of the
principal business and principal offices of Partners GP is c/o Onex Investment
Corp., 712 Fifth Avenue, New York, NY 10019. Information relating to the
directors and executive officers of Partners GP is set forth on Schedule A
hereto which is incorporated herein by reference.

Onex

Onex is an Ontario, Canada corporation. It is a diversified
company that operates through autonomous subsidiaries, associated companies and
strategic partnerships. The address of the principal business and principal
offices of Onex is 161 Bay Street, P.O. Box 700, Toronto, Ontario, Canada M5J
2S1. Information relating to the directors and executive officers of Onex is set
forth on Schedule B hereto which is incorporated herein by reference. Onex
indirectly owns 100% of the equity of Partners GP.

Mr. Schwartz

The principal occupation of Mr. Schwartz is the Chairman of
the Board, President and Chief Executive Officer of Onex. The business address
of Mr. Schwartz is c/o Onex Corporation, 161 Bay Street, P.O. Box 700, Tforonto,
Ontario, M5J 2S1. Mr. Schwartz is a citizen of Canada. Mr. Schwartz is the
indirect holder of all the issued and outstanding shares of Multiple Voting
Shares of Onex, ownership of which entitles Mr. Schwartz to elect sixty percent
(60%) of the members of Onex's Board of Directors.

Page 8 of 29 Pages

(d) and (e). No Reporting Person, nor to the best knowledge of
each Reporting Person, any of the other persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.

Item 3. Source and Amount of Funds or Other Compensation.

Pursuant to a stock purchase agreement dated as of December
18, 2003, between the Issuer and Holdings (the "Stock Purchase Agreement"),
Holdings purchased 8,415,580 shares of Multiple and Variable Vote Restricted
Convertible Common Stock, par value $0.01 per share ("MV Common Stock") of the
Issuer, which is convertible at any time at the option of the holder into the
same number of shares of Ordinary Common Stock, for an aggregate purchase price
of $100,572,185.50. The source of funds for such purchase was Holdings' working
capital. The purchase was made in connection with the consummation of the Third
Amended Joint Plan of Reorganization of the Issuer and certain of its
subsidiaries under Chapter 11 of the United States Bankruptcy Code dated August
18, 2003, as amended (the "Plan of Reorganization"), and the Issuer's emergence
from Chapter 11 proceedings.

Item 4. Purpose of Transaction.

Holdings acquired the MV Common Stock for investment purposes
and to influence control of the Issuer. Pursuant to the Stock Purchase Agreement
and the terms of the Plan of Reorganization, Holdings has committed to purchase
up to an additional $5,000,000.00 of shares of MV Common Stock at a price of
$9.78 per share, upon settlement of disputed claims of certain of the Issuer's
creditors. In addition, Reporting Persons may from time to time acquire shares
of Ordinary Common Stock in the open market or in privately negotiated
transactions, subject to the availability of such shares at prices deemed
favorable, the Issuer's business or financial condition and to other factors and
conditions the Reporting Persons deem appropriate. In the event the Reporting
Persons acquire shares of Ordinary Common Stock, such shares will automatically
be converted into the same number of shares of MV Common Stock and will not
entitle the Reporting Persons to additional voting rights. See Exhibit 4.
Alternatively, the Reporting Persons may sell all or a portion of their shares
of MV Common Stock, or shares of Ordinary Common Stock obtained upon conversion
of such shares of MV Common Stock, in the open market or in privately negotiated
transactions, subject to the rights referred to in Item 6. Holdings has
registration rights with respect to the shares of Ordinary Common Stock
underlying its shares of MV Common Stock. See Exhibit 5.

Holders of MV Common Stock are entitled to elect, and to
remove and replace, four (4) out of nine (9) members of the board of directors
of the Issuer ("Class 1 Directors"). The Reporting Persons are entitled to cast
100% of the votes in any election of, or any vote to remove or replace, Class 1
Directors. Holders of MV Common Stock and Ordinary Common Stock, voting together
as a single class, are entitled to elect, and to remove and replace, an
additional two (2) members of the Issuer's board of directors ("Class 2
Directors"). The Reporting Persons are entitled to cast 50% of the votes
entitled to be cast in any election of, or any vote to remove or replace, Class
2 Directors. See Exhibit 4. The current Class 1 Directors are Steven J. Shulman,
the chief executive officer of the Issuer; Robert Haft; Mark L. Hilson, a
Managing Director of Onex; and Christopher A. Govan, the Managing Director
Taxation of Onex. The current Class 2 Directors are Dr. Rene Lerer, the chief
operating officer of the Issuer; and Robert M. Leblanc, a Managing Director of
Onex Investment Corp., a subsidiary of Onex.

Except as set forth above in this Item 4, no Reporting Person
has any present plans or proposals that relate to or would result in: (a) the
acquisition by any person of additional securities of the Issuer, or the
disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Issuer or of any of its subsidiaries; (d) any change in the
present board of directors or management of the Issuer, including any plans or
proposals to change the number or term of such directors or to fill any existing
vacancies on such board; (e) any material change in the present capitalization
or dividend policy of the Issuer; (f) any other material change in the Issuer's
business or corporate structure; (g) changes in the Issuer's charter, by-laws or
instruments corresponding thereto or other actions that may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to
any of those enumerated above.

Page 9 of 29 Pages

Item 5. Interest in Securities of the Issuer.

(a) and (b). As of the date hereof, Holdings beneficially owns
8,332,726 shares of Ordinary Common Stock (which may be obtained at any time by
conversion of shares of MV Common Stock held by Holdings), which constitute
23.6% of the Issuer's shares of Ordinary Common Stock (assuming 26,982,854
additional shares of Ordinary Common Stock outstanding). The shares of MV Common
Stock beneficially owned by Holdings entitle Holdings to 50% of the voting
power of the MV Common Stock and Ordinary Common Stock voting together as a
single class and the power to vote for the election of directors of the Issuer
as described in Item 4.

All of the shares beneficially owned by Holdings may be deemed
as beneficially owned by each of Partners, Partners GP LP, Partners GP and Onex.
As discussed above, such shares constitute 23.6% of the Issuer's shares of
Ordinary Common Stock (assuming 26,982,854 additional shares of Ordinary Common
Stock outstanding). The shares of MV Common Stock beneficially owned by such
Reporting Persons entitle such Reporting Persons to 50% of the voting power of
the MV Common Stock and Ordinary Common Stock voting together as a single class
and the power to vote for the election of directors of the Issuer as described
in Item 4. Mr. Schwartz may be deemed a beneficial owner of the shares of
Ordinary Common Stock beneficially owned by the other Reporting Persons but
disclaims beneficial ownership of such shares.

(c) On January 5, 2004, Holdings sold 82,854 shares of MV
Common Stock, for a price of $12.07 per share, in a private transaction. Except
as described herein and in Item 3, no Reporting Person nor, to the best
knowledge of each Reporting Person, any person identified in Item 2, has
effected any transaction in shares of Ordinary Common Stock during the preceding
60 days.

(d) To the best knowledge of the Reporting Persons, no
person other than the Reporting Persons has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, shares
of Ordinary Common Stock or MV Common Stock, except that limited partners of the
Reporting Persons may receive distributions including a portion of such
dividends or proceeds.

(e) Not applicable.

Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to
the Securities of the Issuer.

To the best of knowledge of the Reporting Persons, except as
set forth herein or in the Exhibits filed herewith, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with respect to
any securities of the Issuer, including, but not limited to, transfer or voting
of any securities of the Issuer, finder's fees, joint ventures, loan or option
agreements, puts or calls, guarantees of profits, division of profits or loss or
the giving or withholding of proxies except as set forth in the other items
hereof and the Exhibits, and except as follows:

The partnership agreement of Partners contains provisions
whereby the partnership's general partner, Partners GP LP, will receive a
certain percentage of net income, if any, derived from the partnership's
investments.

In addition, pursuant to the Co-Investment Agreement dated as
of January 5, 2004 among (i) R(2) Investments, LDC, Amalgamated Gadget, L.P. and
Scepter Holdings, Inc. (collectively "R(2)") and (ii) Holdings, Onex and
Partners (collectively the "Onex Group"), R(2) and the Onex Group agreed that
neither party would commence any tender offer for shares of Ordinary Common
Stock or securities convertible into or exchangeable or exercisable for, or
which participate in dividends or distributions upon liquidation with, Ordinary
Common Stock, unless whichever of the Onex Group or R(2) desires to commence a
tender offer affords the other the opportunity to participate in such tender
offer as a bidder in proportion to the relative proportion of shares of Ordinary
Common Stock and MV Common Stock beneficially owned, or in which an economic
interest is held, by the Onex Group and R(2), respectively. See Exhibit 2.

In addition, pursuant to the Issuer's amended and restated
certificate of incorporation, until the earlier of January 5, 2007 and the first
date on which the equity interest in the Issuer held by the Reporting Persons
and their affiliates falls below certain specified levels, all holders of common
stock of the Issuer have the right to participate in certain sales of MV Common
Stock by the Reporting Persons and the Reporting Persons have the right to
participate in certain sales of Ordinary Common Stock by certain other
stockholders. See Exhibit 4.

Item 7. Material to Be Filed as Exhibits.

1. Joint Filing Agreement.

Page 10 of 29 Pages

2. Co-Investment Agreement, dated January 5, 2004, by and among
R2 Investments, LDC, Amalgamated Gadget, L.P., Scepter
Holdings, Inc., Magellan Holdings LP, Onex Corporation and
Onex Partners LP.

3. Stock Purchase Agreement, dated as of December 18, 2003,
between Magellan Health Services, Inc. and Magellan Holdings
LP (incorporated by reference to Exhibit 2.4 to the Form 8-K/A
filed with the Securities and Exchange Commission by the
Issuer on January 7, 2004).

4. Amended and Restated Certificate of Incorporation of Magellan
Health Services, Inc., as in effect on January 5, 2004
(incorporated by reference to Exhibit 2.9 to the Form 8-K
filed with the Securities and Exchange Commission by the
Issuer on January 6, 2004).

5. Registration Rights Agreement, dated as of January 5, 2004,
among Magellan Health Services, Inc., Magellan Holdings LP and
Aetna, Inc. (incorporated by reference to Exhibit 2.15 to
the Form 8-K filed with the Securities and Exchange Commission
by the Issuer on January 6, 2004).

6. Power of Attorney incorporated by reference to the Amendment
to Form 4 for Dura Automotive Systems, Inc. filed with the
Securities and Exchange Commission by Gerald W. Schwartz on
September 10, 1996.

Page 11 of 29 Pages

SIGNATURE

After reasonable inquiry and to the best of my knowledge and
belief, I hereby certify that the information set forth in this statement is
true, complete and correct.

Dated: January 15, 2004

MAGELLAN HOLDINGS LP

By: ONEX PARTNERS LP, its General Partner

By: ONEX PARTNERS GP LP, its General Partner

By: ONEX PARTNERS GP INC., its General Partner

By: /s/ Robert Le Blanc
--------------------------------------------------
Name: Robert Le Blanc
Title: Vice President

ONEX PARTNERS LP

By: ONEX PARTNERS GP LP, its General Partner

By: ONEX PARTNERS GP INC., its General Partner

By: /s/ Robert Le Blanc
--------------------------------------------------
Name: Robert Le Blanc
Title: Vice President

ONEX PARTNERS GP LP

By: ONEX PARTNERS GP INC., its General Partner

By: /s/ Robert Le Blanc
--------------------------------------------------
Name: Robert Le Blanc
Title: Vice President

ONEX PARTNERS GP INC.

By: /s/ Robert Le Blanc
--------------------------------------------------
Name: Robert Le Blanc
Title: Vice President

Page 12 of 29 Pages

ONEX CORPORATION

By: /s/ Donald Lewtas
--------------------------------------------------
Name: Donald Lewtas
Title: Authorized Signatory

GERALD W. SCHWARTZ

By: /s/ Donald Lewtas
------------------------------------------------------
Name: Donald Lewtas
Title: Authorized Signatory for GERALD W. SCHWARTZ

Page 13 of 29 Pages

SCHEDULE A

Directors and Executive Officers of Onex Partners GP Inc. ("Partners GP")

The name, business address, present principal occupation of each
director and executive officer of Partners GP are set forth below. All executive
officers and directors listed on this Schedule B are United States citizens,
except as specifically indicated below.

Name Business Address Present Principal Occupation or Employment

Eric Rosen c/o Onex Investment Corp. President and Director; Managing Director of Onex
712 Fifth Avenue Investment Corp.
New York, NY 10019

Anthony Munk c/o Onex Investment Corp. Vice President; Managing Director of Onex Investment Corp.
712 Fifth Avenue
New York, NY 10019

John Troiano c/o Onex Investment Corp. Vice President; Managing Director of Onex Investment Corp.
712 Fifth Avenue
New York, NY 10019

Robert Le Blanc c/o Onex Investment Corp. Vice President and Director; Managing Director of Onex
712 Fifth Avenue Investment Corp.
New York, NY 10019

Page 14 of 29 Pages

SCHEDULE B

Directors and Executive Officers of Onex Corporation ("Onex")

The name, business address, present principal occupation of each
director and executive officer of Onex are set forth below. All executive
officers and directors listed on this Schedule B are Canadian citizens, except
as specifically indicated below.

Name Business Address Present Principal Occupation or Employment

Gerald W. Schwartz 161 Bay Street Chairman of the Board, President, Chief Executive
P.O. Box 700 Officer and Director
Toronto, Ontario
Canada M5J 2S1

Ewout R. Heersink 161 Bay Street Managing Director and Chief Financial Officer
(Netherlands Citizen) P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Mark L. Hilson 161 Bay Street Managing Director
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Donald W. Lewtas 161 Bay Street Managing Director Finance
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Anthony R. Melman 161 Bay Street Managing Director
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Seth M. Mersky 161 Bay Street Managing Director
(U.S. Citizen) P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Andrew J. Sheiner 161 Bay Street Managing Director
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Nigel S. Wright 161 Bay Street Managing Director
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Page 15 of 29 Pages

Name Business Address Present Principal Occupation or Employment

John S. Elder, Q.C. Fraser Milner Casgrain LLP Secretary; Partner at Fraser Milner Casgrain LLP
100 King Street West
42nd Floor - 1 First Canadian Place
Toronto, Ontario
Canada M5X 1B2

Christopher A. Govan 161 Bay Street Managing Director Taxation
P.O. Box 700
Toronto, Ontario
Canada M5J 2S1

Daniel C. Casey Creson Corporation Director; Chairman and Chief Executive Officer of
16 Clarence Square Creson Corporation, an Ontario real estate company
Toronto, Ontario
Canada M5V 1H1

Donald H. Gales P.O. Box 31489SMB, Villa 639 Director; Corporate Director
Grand Cayman Island
British West Indies

Serge Gouin Citigroup Global Markets Canada Inc. Director; Vice-Chariman of Citigroup Global Markets
630 Rene-Levesque Blvd. W. Canada Inc., an investment firm
Suite 2450
Montreal Quebec H3B 1S6

Brian M. King 10 Sunset Trail Director; Corporate Director
Kenora, Ontario
Canada P9N 4H9

J. William E. Mingo, Q.C. Stewart McKelvey Director; Partner at Stewart McKelvey Stirling Scales,
Stirling Scales a law firm in Halifax, Nova Scotia.
1959 Upper Water St.
10th Floor
Halifax, Nova Scotia
Canada B3J 2X2

J. Robert S. Prichard, O.C. One Yonge Street Director; President and Chief
Toronto, Ontario Operating Officer of Torstar Corporation
Canada M5E 1E6

R. Geoffrey P. Styles 8 York Ridge Rd. Director; Corporate Director
Willowdale, Ontario
Canada M2P 1R7

Arni C. Thorsteinson Shelter Canadian Properties Limited Director; President of Shelter Canadian Properties
2600-7 Evergreen Place Limited
Winnipeg, Manitoba
Canada R3L 2T3

Heather M. Reisman Indigo Books & Music Inc. Director; President and Chief Executive Officer of
468 King St. W. Indigo Books & Music Inc.
Suite 500
Toronto, Ontario M5V 1L8

Page 16 of 29 Pages

INDEX TO EXHIBITS

Page No. in Sequential Numbering
Exhibit System
------- ------

1. Joint Filing Agreement.

2. Co-Investment Agreement, dated January 5, 2004, by and among
R2 Investments, LDC, Amalgamated Gadget, L.P., Scepter
Holdings, Inc., Magellan Holdings LP, Onex Corporation and
Onex Partners LP.

Page 18 of 29 Pages