Magna, Stronach buyout to go ahead

Auto parts giant Magna International Inc.’s billion-dollar buyout of founder Frank Stronach’s controlling interest appears set to proceed, as dissident shareholders – led by the Canada Pension Plan Investment Board (CPPIB) – have decided against further legal appeals.

A three-judge panel of Ontario’s Divisional Court upheld a lower-court decision approving the buyout on August 30.

The CPPIB had campaigned against the deal, arguing it would set a dangerous precedent for similar, future deals in terms of the loss of shareholder value.

The deal provides for Stronach to receive US$300 million in cash, US$120 million in consulting fees over the next four years, nine million single-vote shares of Magna and control over a new joint venture focused on electric vehicles. Based on the class A share price before the deal was announced, the payout is an 1,800-per-cent premium for Mr. Stronach’s controlling shares, with a total value of US$863-million.

Mr. Stronach would remain chairman, and also receive an estimated $120-million in consulting fees over the next four years.

“We are very pleased with the court’s decision and that we are finally in a position to close the arrangement, which has received strong support from Magna’s shareholders,” Vince Galifi, CFO of Aurora, Ont.-based Magna, said in a statement.“With the transaction completed, we can refocus on pursuing our long-term growth strategy, including further investments in both innovation and emerging markets, in order to continue to serve our customers around the world.”