Magna International chairman Frank Stronach has agreed to allow shareholders to vote on eliminating his family’s special rights and adopt a single class of stock for the auto parts company.
Magna co-chief executive Don Walker said May 6 if shareholders approve, “Magna will be a one-share, one-vote company no longer controlled by the Stronach Trust.” The family trust currently owns all of the 726,829 B shares, each of which has 300 votes attached.
Under terms of the proposed deal, Magna said it would purchase all of the multiple voting B shares. In exchange, the trust would receive $300 million plus nine million new A shares. The total value of that deal would be $863 million, the company said.
The transaction would leave the Stronach trust with about 7.4% of a single class of about 121 million shares in Magna.
Walker said the dual-class structure at Magna had been a concern within the investment community for several years. He said some United States investment firms have a practice of avoiding companies with dual-class voting structures, and that may have depressed the market value of all Magna shares.
There also have been well-publicized complaints about Stronach’s control of Magna and several spinoff companies and the fees he receives from the publicly traded entities. Walker said the consulting fees paid to Frank Stronach and related entities by Magna would be phased out by the end of 2014.
One of the spinoff companies, racetrack owner Magna Entertainment Corp., filed for Chapter 11 bankruptcy protection last year. Its parent company, MI Developments, a real-estate entity, recently took over its major assets as part of a reorganization.