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Dissident Shareholders Lose at Magna

Founder Frank Stronach and family prevail in stock swap.

by on Aug.31, 2010

Dissident shareholders have lost their bid to block a plan to eliminate Magna’s dual class of shareholders. (See Stronach Prevails at Magna! Shareholders Approve Lavish Buyout of Privately Held Family Shares by Ken Zino. )

The plan, which as already been approved by Magna’s shareholders, unjustifiably enriched Frank Stronach, Magna’s founder, according to the dissidents, who waged a vigorous campaign to block the transaction.

The dissident shareholders included the Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, OMERS, the Alberta Investment Management Corp. and British Columbia Investment Management Corp.

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Deals Good and Bad!

Dissidents also argued that Justice Wilton-Siegel placed too much emphasis on a shareholder vote and the rise in the company’s shares after the plan was announced.

Stronach would receive $300 million US in cash, $120 million in consulting fees over the next four years, nine million single-vote shares of Magna and control over a new joint venture focused on electric vehicles, under the terms.

However, the plan also ends Stronach’s control over the one of the world’s largest parts makers and leaves the company in under the control of its professional management team.

Magna said it would implement the changes, ending the dual shares, after the Ontario Divisional Court
dismissed the appeal of certain dissident minority shareholders of Magna and upheld the decision of the Ontario Superior Court approving the previously announced plan of arrangement to eliminate Magna’s dual-class share
structure.The he decision of the Divisional Court followed a hearing held on August 26,

“We are very pleased with the Court’s decision and that we are finally in a position to close the arrangement, which has received strong support from Magna’s shareholders,” said Vince Galifi, Executive Vice-President and Chief Financial Officer.

“With the transaction completed, we can refocus on pursuing our long-term growth strategy, including further investments in both innovation and emerging markets, in order to continue to serve our customers
around the world,” he said.

“As Magna has been notified that the dissident shareholders do not intend to appeal the Divisional Court’s decision, Magna expects to implement the arrangement later today. Upon closing, Magna’s Class A Subordinate Voting Shares will be redesignated as ‘common shares’. Magna’s common shares will trade under the symbol ‘MG’ on the Toronto Stock Exchange and will continue to trade under the symbol ‘MGA’ on the New York Stock Exchange,” Magna said.

(See also Ken Zino’s OSC Orders Magna to Disclose More on Stock Deal)

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