MI Developments Corp., which has unveiled plans to acquire the outstanding stock it doesn't own in racetrack-operating company Magna Entertainment Corp., announced Aug. 20 that chief executive officer Brian Tobin had resigned and was replaced by John Simonetti. Previously, Simonetti was chief financial officer of MID, a real estate operating company that owns controlling interest in MEC.
Tobin also resigned his positions as vice chairman and a director of MEC.
"Brian Tobin has been a great team leader and a great team player," MID and MEC chairman Frank Stronach said of the resignation.
"I have great respect for the MEC team and for Frank Stronach," Tobin said in a statement released by the company.
MID is offering $1.05 in cash and 0.2258 of an MI Class A share for each Magna Entertainment Class A share, which equates to about $7 a share total. MID wants to buy the remaining 40.8 million Class A shares it doesn't own for a total of $285.8 million. The cash component of the deal, if all shareholders accepted the offer, would be about $42.9 million. Both companies are publicly held.
In a conference call with media and financial analysts Aug. 23, Stronach said he couldn't provide details on the reasons for Tobin's resignation. He only said the executive told him he wanted to pursue other interests.
"He left on his own free will," Stronach said. "He quit. If somebody wants to leave, very seldom do I persuade someone to stay."
Stronach was questioned at length by the financial analysts about the proposed takeover and whether it would have greater benefit to MEC shareholders than MID shareholders.
The company chairman said an outside committee is evaluating the proposal and its completion would be dependent upon it being in the best interests of shareholders in both companies.
"It has got to make good business sense, it has got to be fair, and it has got to be good for MEC and MID shareholders," Stronach said. "In the final analysis, either the shareholders approve it or they don't. There is a lot of synergies between the two and they would complement each other...Hopefully we can convince both shareholders that by merging everybody will be better off."
Greenlight Capital Inc., which reportedly owns nearly 10% of MID stock, has requested the Ontario Securities Commission require MID to put the proposed buyout of MEC to a vote of minority shareholders. Also, some MEC shareholders have filed suit seeking to block the transaction.
Acknowledging that MID is profitable and MEC is not, Stronach said he believed the business strategy of the racetrack company is sound and that MEC eventually would turn the corner. He noted the company had purchased, and was in the process of rebuilding, some aging racetracks and building new facilities. He said much of MEC's upside involves its ability to become a global player within the gaming industry.
"We believe that eventually we will be able to reach the whole world with a racing network," Stronach said. "I am convinced this will be a great company, but it will take some time. We believe MEC will be one of the great global companies because of its unique content. At this moment...it will take some time for MEC to swim upstream and become profitable."
Stronach said he has not been personally involved in the proposed takeover of MEC by MID, noting that committees within both companies and lawyers are evaluating the deal.