Investor says Magna Entertainment deal ‘coercive’
April 2nd, 2008 | by admin |(In U.S. dollars)
TORONTO, April 2 (Reuters) - A big MI Developments Inc(MIMa.TO: Quote, Profile, Research) shareholder is crying foul over a proposal to spinoff the company’s majority stake in struggling racetrackoperator Magna Entertainment Corp (MECa.TO: Quote, Profile, Research), saying the dealwill result in an “outrageous payoff” to controlling MIDinvestor Frank Stronach.
Greenlight Capital, which said on Wednesday it holds morethan 10 percent of MID’s shares, suggests that, rather thanproceeding with a spinoff, the company’s board should returnMID’s excess capital to shareholders, increase annualdistributions and dispose of MEC without a shareholder vote.
“Greenlight intends to vote all of its shares against theproposed reorganization as it currently stands,” it said in astatement, adding: “This is a very coercive transaction.”
The current proposal, which would see MEC sold to anunidentified buyer for $25 million, is supported by themajority of MID shareholders, including Stronach.
Under the plan, existing MID shares would be exchanged for$15.50 and shares of a new public company.
The new MID would be owned about 80 percent by the formerpublic shareholders, and 10 percent each by the Stronach Groupand Magna International Inc (MGa.TO: Quote, Profile, Research).
Magna International, which would be asked to guarantee a $1billion five-year term loan in exchange for a guarantee feefrom MI Developments, has not committed to the proposal.
The auto parts maker would pay an amount equal to theguarantee fee for its 10 percent interest in the new company.
