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Stronach Prevails at Magna! Shareholders Approve Lavish Buyout of Privately Held Family Shares

The controversial and expensive transaction still faces a "fairness challenge" in Ontario Superior Court, though.

by on Jul.23, 2010

Magna founder Frank Stronach is ready to relinquish control of the Canadian mega-supplier.

Well, score a big victory for the Stronach family. Magna International Inc. (TSX: MG.A; NYSE: MGA) today announced that its shareholders approved the previously announced proposal to eliminate Magna’s dual class share structure, paying the founding Stronach family a huge premium in the process.

Stronach currently controls more than 54% of Magna shares while owning just 1% of its equity.

The controversial deal ends founder Frank Stronach’s control of the company, but at a steep price to shareholders of the common stock, and gives him control of a new electric car components operation for very little money.

The so called “Plan of Arrangement” that buys out the Stronachs was approved by 75.28% of the 89,847,120 votes cast by the disinterested “minority” holders of Magna’s Class A Subordinate Voting Shares.

Following the Loonies!

Critics contend that the proposed transaction is “abusive of shareholders and the capital markets” for a number of reasons, including the estimated 1,800% premium being paid by Magna for the Stronach Class B Shares relative to the market price of the Subordinate Voting Shares. One study shows that the usual premium for such a deal is about 30%.

Implementation of the proposed Arrangement remains subject to approval by the Ontario Superior Court at a fairness hearing scheduled on August 12 and 13, 2010. Some shareholders have already filed notices of appearance. It is certain that those shareholders will present arguments against the proposed transaction.

(See OSC Orders Magna to Disclose More on Stock Deal)

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