TORONTO (Reuters) - Frank Stronach, founder of MI Developments Inc MIMa.TO, easily defeated on Wednesday an attempt by MID shareholder Greenlight Capital to block Stronach’s proposed restructuring of the company.
Greenlight, which owns just over 10 percent of MID shares, had asked shareholders to adopt a proposal recommended by MID’s board in 2005, but never acted on, instead of Stronach’s restructuring plan, which includes many of the same recommendations.
MID is the property arm of Canadian auto-parts empire Magna International MGa.TO, which Stronach founded and which he chairs.
Both Stronach and Greenlight proposed increasing MID’s dividends, returning excess capital to shareholders, buying back shares and disposing of MID’s interest in struggling racetrack operator Magna Entertainment MECa.TO (MEC).
“Why is Mr. Stronach now in favor of these components in his proposed reorganization, but not in favor of the 2005 board recommendations,” asked a Greenlight representative at the MID’s annual general meeting.
“We think it’s because (Stronach‘s) proposed reorganization contains a multi-hundred-million dollar payoff for Mr. Stronach, while the 2005 board recommendations do not.”
Greenlight’s proposal was easily defeated by stock owned or controlled by Stronach.
Stronach’s plan, would see the auto parts magnate buy struggling racetrack operator Magna Entertainment (MEC), in which MID holds a controlling interest, for $25 million.
MID shareholders would be compensated through a restructuring under which they would exchange their current shares for $15.50 cash and new shares of MID.
MID would transfer around $250 million in MEC loans, $150 million in cash, and about 60 hectares of land in Aurora, Ontario, to a limited partnership controlled by Stronach.
Stronach would have a 51 percent interest in the partnership and, as general partner, would have exclusive control and authority over all its activities.
Holders of the new MID shares, who could vote on the plan in about two weeks, would own the rest of the partnership.
If the deal goes through, Stronach would invest an additional $25 million in MEC.
The deal hinges on a five-year $1 billion loan from Magna International to MID, which the former has not yet agreed to.
MID reported a lower first-quarter profit on Wednesday due in part to a quarterly loss at MEC.
The company said its consolidated profit fell to $6.6 million, or 14 cents a share, from $23.3 million, or 48 cents a share, in the same quarter last year.
MID’s real estate unit reported funds from operations of $43.9 million, or 94 cents a share, for the quarter ended March 31, up from $34.2 million, or 71 cents per share, a year ago.
Consolidated revenue during the quarter fell to $276.7 million from $294.1 million.
Magna Entertainment reported a first-quarter loss on Tuesday, citing a poor performance at its Gulfstream racetrack operation in Florida, cumbersome government regulations and a hefty debt load.
Reporting by John McCrank; Editing by Peter Galloway