Magna International has proposed a new publicly traded company--MI Developments Inc.--that would own all of Magna's automotive real estate as well as all of Magna Entertainment Corp., the leading owner of racetracks in North America in terms of holdings.
In statement released July 7, Magna said MID, the spin-off company, would include real estate assets with an aggregate net book value of about $1.1 billion as of March 2003.
Magna management said it believes the "value of Magna's real-estate business and investment in MEC are not fully reflected in Magna's share price." By distributing the assets to shareholders in the form of publicly-traded MID shares, Magna "expects to unlock the unrecognized value of these assets and place it directly into the hands of Magna shareholders," the company said in a statement.
Said Belinda Stronach, president and chief executive officer of Magna: "We believe the proposed spin-off of MID creates value for our shareholders, as the combined value of Magna and MID after the spin-off is expected to exceed Magna's current trading value. Magna will continue to have a strong balance sheet and to be well positioned to grow its business."
The spin-off is subject to the approval of Magna shareholders. A special meeting of shareholders is scheduled for Aug. 19 in Toronto, Ontario, Canada.
The share capital of MID following the spin-off would mirror that of Magna, in order to preserve in MID the relative ownership and voting rights of Magna shareholders. Holders of MID Class A subordinate voting shares would be entitled to one vote per share, and holders of MID Class B shares would get 500 votes per share.
In the spin-off, Magna shareholders would receive one MID Class A subordinate voting share for every two Magna Class A subordinate voting shares, and one MID Class B Share for every two Magna Class B shares held as of the close of business on the record date for the distributions, which is expected to be Aug. 29.
Magna has revised its expectations for diluted earnings per share for the second quarter of 2003. The company now expects diluted earnings per share for the second quarter to be at the high end or to exceed the range of $1.50 to $1.70 previously disclosed in a May 8 press release.