Magna documents may not seal Stronach deal

Thu Jun 17, 2010 4:50pm EDT
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By John McCrank

TORONTO (Reuters) - Auto parts maker Magna International Inc unveiled more details on Thursday on its proposed payout to founder Frank Stronach of nearly $900 million, but it may not be enough to satisfy regulator concerns.

Responding to complaints from the Ontario Securities Commission (OSC), Magna released two reports about the controversial plan, which would eliminate its two-class share structure and see Stronach cede control.

The Stronach Trust has about two-thirds of Magna's voting rights through the majority of its class B supra-voting shares. In exchange for giving them up, the trust would get 9 million newly issued class A shares, or about 7.5 percent of Magna, and $300 million in cash.

If approved in court and by shareholders, the deal would give 77-year-old Stronach, who came to Canada from Austria at the age of 21 with only a couple hundred dollars in his pocket, an $863 million pay day.

But after numerous complaints from investors that the premium Stronach would receive is unreasonably high, the OSC called a hearing on the matter for June 23 that could block the plan, or place terms and conditions on it that would need to be met for it to go ahead. A preliminary hearing is scheduled for Friday.

"There are two sets of concerns," said Ermanno Pascutto, executive director of FAIR Canada, an independent non-profit agency that champions investor rights, "one is the premium and the second is the process.

"I don't think that (the documents Magna released) really addresses any of the concerns."

Pascutto and others have called for the OSC to block the plan or force Magna to provide an assessment of fairness of the deal, or, at the very least, for the company's board to recommend the deal to shareholders, which it has not done.   Continued...