Frank Stronach, chairman of Magna Entertainment Corp., attempted to allay investor fears Thursday on the heels of yet another shakeup in the company's leadership. Stronach said he will serve as MEC's chief executive officer until a replacement can be found for outgoing president and CEO Tom Hodgson, whose departure was announced March 14.
News of Hodgson's removal sent Magna stock tumbling, losing 7.9% of its worth the following day. In Thursday's hastily-called teleconference, Stronach met concerns about the potential for a protracted search for Hodgson's successor as well as ongoing instability at the helm.
"We've always been straight up with investors," said Stronach, who has overseen five chief executives in Magna's nine-year history. "There is no vacuum here. This is a complex business. Tom (Hodgson) and I talked and decided that we should look for someone more horse and gaming-oriented. No one is upset. I had hoped Tom would be CEO for the next 20-30 years."
In the March 14 press release issued by the company regarding the tenure of Hodgson, who leaves after serving just a year in the position, Stronach said Hodgson joined MEC in early 2005 "to develop and implement the company's recapitalization plan announced in July 2005, and under his leadership the plan has progressed well."
Also present on the teleconference, Hodgson reiterated his presence was to oversee the recapitalization plan of asset sale and debt reduction, and said he felt the need to respond to what he termed a "market overreaction."
"At that time (of his hiring) I made it clear to Frank and the board that I had no horseracing or gaming background, and that this was a deficiency that would need to be addressed at some point in the future," Hodgson said. "We all agreed the need to improve the financial discipline within the company and to have a concerted focus on improving the balance sheet was paramount--and those were certainly efforts I felt comfortable undertaking."
All this comes less than three weeks after Magna announced record year-end losses of $105.3 million, extending its three-year run of red ink to more than $306 million. Stronach said to remedy the losses he would seek partnerships in Magna's gaming and horseracing holdings, including flagship properties like Santa Anita Park.
"We've been in serious talks," said Stronach, who cited the company's aggressive acquisition of "infrastructure and content" as major accomplishments of recent years. "Now we are making debt reduction our top priority. I feel very strongly we have reached the bottom of the valley and we are climbing out slowly."