Based on the recommendations of a special committee of independent directors, the board of Magna Developments has come out against proposals from Greenlight Capital Inc.
The Greenlight proposals that the MID board recommends shareholders reject include selling of Magna Development's 59% equity (96% voting) interest in racetrack operator Magna Entertainment and converting MID to a real-estate investment trust. Greenlight Capital is a New York investment firm with a 10% stake in MI Developments,
In addition, the MID board has voted to adopt the special committee's recommendation of a $0.60 per share dividend, commencing with the dividend payable with respect to the first quarter of 2005.
"After thorough and independent analysis over the past two months, the special committee determined that it is not in the best interests of the company or its shareholders to pursue either of these fundamental corporate changes at this time," said a statement released by MID from Douglas Young, chairman of the board's special committee, concerning the Greenlight proposals that will be considered by shareholders at the company's annual and special meeting May 4. "We continue to view MEC as a strategic investment and believe there is significant upside value in MEC that we might jeopardize by spinning or selling MEC now. We also don't believe it is currently necessary to become a REIT to increase the return on equity of our real estate business and enhance value for our shareholders."
Frank Stronach, MI Developments' chairman and controlling shareholder, and Dennis Mills, MID vice chairman, abstained from voting on the proposal to sell MID's Magna Entertainment interests because both are directors and officers of MEC.
Stronach also voiced his concerns over the dividend recommendation from the special committee, but voted for it.
"My belief is that a relatively young growth company like MID should not use its cash flow to pay significant dividends or take on debt solely to increase leverage," Stronach said in the MID statement. However, I recognize that the board is responsible to all shareholders and, based on the extensive analysis conducted by the special committee, I voted in favor of the recommendations."