Magna founder Frank Stronach is ready to trim back his ties to the Canadian mega-supplier.
The Ontario Securities Commission (OSC) has issued an order requiring Magna International Inc. (TSX: MG.A, NYSE:MGA) to make additional disclosures in order to proceed with its proposed transaction to eliminate the company’s dual class share structure.
The deal would apparently end founder Frank Stronach’s control of the company, but at a steep price to shareholders of the common stock.
Stronach controls more than 54% of Magna shares while owning 1% of its equity.
OSC said the proxy “fails to provide sufficient information concerning the desirability or fairness of the Proposed Transaction and the board of directors of Magna has not made useful recommendations regarding the arrangement in the Circular.”
OSC also said, “it has been alleged 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 Class B Shares relative to the market price of the Subordinate Voting Shares.”
Then OSC went on to say, “It is clear that the Special Committee (of the Magna Board) was aware and concerned that the premium being paid to the Stronach Trust under the Proposed Transaction is considerably in excess of the premiums paid on other transactions collapsing multiple voting share structures.”
Under a Magna Board approved plan, the Stronach Trust would receive $300 million in cash and 9 million Class A shares for the Class B stock that currently gives the family roughly 66% of voting rights at the Canadian auto parts maker. The deal values Stronach’s payout at $927 million. In New York Class A is trading at about $70 a share.