Magna stands by dual-share deal

The Ontario Securities Commission wants to block a plan to eliminate a dual-class share structure at Magna International Inc. that would see founder and chairman Frank Stronach receive millions in return.

But takes conciliatory tone after regulator voices concern

Magna says it will work with the Ontario Securities Commission to discuss the manner in which it plans to end its dual-class share structure, after the commission voiced displeasure with the current plan.

Magna International chair Frank Stronach has outlined a proposal that would see him lose voting control of the company he has headed since the 1970s. ((Canadian Press))

Late Tuesday, the Ontario Securities Commission moved to block the proposal on the grounds that investors had not been provided with sufficient information about the deal before voting.

But on Wednesday, Magna International CFO Vincent Galifi said the company stands by the original plan — which would give Magna founder Frank Stronach an 1,800 per cent premium to hand in his multiple-voting shares — but will work with the regulator despite insisting that shareholders have been given enough information to form their own conclusions on the deal.

"We strongly believe our existing disclosure is complete, that Magna's board undertook a proper process, and that our shareholders should not be denied the opportunity to decide the outcome of the proposed transaction," Galifi said.

"Nonetheless, we will work to address the OSC's concerns though we do not believe any additional information we might disclose will change shareholders' views of the value this transaction can unlock for holders of Magna's class A shares."

In a statement of allegations released late Tuesday, the provincial regulator called the plan "contrary to the public interest and harmful to the integrity of the Ontario capital markets."   

The OSC has scheduled a hearing for June 23, during which it will ask a commission panel to strike down the proposed transaction, scheduled for a Magna shareholder vote five days later.

In its statement, the OSC said the planned transaction "is, in these novel and unprecedented circumstances, contrary to the public interest" and should be blocked.

Broad opposition

The transaction has come under fire from a number of the company's shareholders — including the Ontario Teachers' Pension Plan and the Canada Pension Plan Investment Board — which say the payment is excessive and the deal would dilute Magna's share value.

Both pension plans publicly oppose dual-class share structures like Magna's, but will vote against the proposal because of the premium it pays Stronach.

Stronach and his family have controlled the company through a special class of shares that gives them majority voting rights without a majority equity stake. Each of the family's 750,000 class B shares has 300 votes, giving the Stronachs a 66 per cent voting interest.

With files from The Canadian Press