The parent company of Magna Entertainment Corp. has called off a scheduled July 24 shareholder meeting to vote on a complex reorganization plan that has raised the ire of some large stakeholders.
MI Developments Inc., which operates MEC as a subsidiary of auto parts giant Magna International Inc., said without explanation in a three-paragraph news release June 27 it would postpone the shareholders meeting indefinitely.
The proposed plan, which in part would have transferred about $150 million in cash and $250 million in debt from financially-troubled MEC to a separate company headed by Frank Stronach – the chairman of all three involved Magna companies – has been blasted by at least two large stakeholders in MID.
It is believed that because they each control at least 10% of MID’s stock, the two dissident shareholders – Greenlight Capital and Hotchkis & Wiley Capital Management – have the ability to block the plan in its current form through dissent rights. Greenlight Capital in the past has sued MID in Canadian court for shareholder oppression.
“The implementation of the reorganization proposal would be subject to applicable shareholder, court and regulatory approvals and certain other material conditions, some of which are beyond MID's control,” the news release said. “There can be no assurance that the transaction contemplated by the reorganization proposal, either as currently structured or in an amended form, or any other transaction, will be completed.”
The news release said a MID special committee hasn’t made “any decisions or recommendations with respect to the reorganization proposal,” and could further postpone or cancel the meeting.
The maturity date for a $40-million loan from Bank of Montreal, which has been extended at least four times since the beginning of the year, is scheduled for July 30. But the due date on that loan, which is secured in part by Golden Gate Fields and Santa Anita Park, can be accelerated to 14 days from the time MID officially announces the reorganization plan will not go forward, according to documents previously filed with the Securities and Exchange Commission.
MEC has lost more than $520 million since 2002 and is currently trying sell off several of its racetrack properties in a way to reduce debt.