More than 75% of Magna International Inc.’s common shareholders approved a plan to pay about $1 billion to founder and chairman Frank Stronach, whose family would relinquish voting control of the company,
the Associated Press reported.
Under the plan, which requires approval from the Ontario Superior Court, the global auto parts maker’s dual-class share structure would be eliminated, and Stronach would give up his controlling class B super-voting shares, the AP article said.
In exchange, Stronach and his family will receive $300 million in cash, 9 million common A shares of Magna and control over a joint venture that will develop components for electric vehicles. Stronach will also receive an estimated $120 million in consulting fees, which will be gradually phased out by 2014. The Stronach Trust, consisting of Stronach and his family, would continue to own a minority stake in the company through the A shares it receives.
A statement issued by Magna said some shareholders plan to appear before the court to argue against the proposed transaction, AP reported.
Under the dual-class structure, the Stronach family has a 66% voting interest, although they do not have a majority equity stake, the report noted.
Magna co-CEO Don Walker said in May that the proposal to eliminate the Stronach family’s voting control is meant to address shareholders’ frustrations with what they view as an unreasonably low share price.
The Canada Pension Plan Investment Board, which owns about 1% of the company, said that although it is opposed to dual-class structures, it believes “the deal paid the founding Stronach family too much and would unfairly dilute shareholder value,” the article said. (Source: Associated Press, July 23, 2010.)
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