Stronach family agrees to plan that would dilute its stake in Magna auto parts maker

Magna International may get new vote structure

TORONTO — Magna International Inc. shareholders will get a chance to end the Stronach family’s control over the global auto parts maker, company officials said Thursday.

Investors responded favorably as Magna shares closed up almost 12 percent.

Frank Stronach and his family have controlled the company through a stock structure that gives the Stronach Trust a majority stake.

Magna co-chief executive Don Walker told analysts Thursday that the Stronach Trust has agreed to let other shareholders vote on eliminating the family’s special rights and adopt a single class of stock.

“If shareholders approve the transaction, Magna will be a one-share, one-vote company no longer controlled by the Stronach Trust,” said Walker.

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 9 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 percent 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 U.S. investment firms have a practice of avoiding companies with dual-class voting structures, and this may have depressed the market value of all Magna shares.

As well, there have also 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.

“During this time, Magna will continue to benefit from Frank’s leadership, vision and relationships across the global automotive industry,” Walker said.

Part of the proposal would include the creation of a new joint venture with the Stronach group that would develop electric vehicles. The new venture would be 73 percent owned by Magna.

Walker said the joint venture “is a good way for Magna to pursue an opportunity that has significant growth potential but which is also not without risk.”

The proposed changes to the way Magna is governed were announced ahead of the company’s annual shareholders meeting and after the company announced its first-quarter financial results.

The Aurora, Ontario, company net income of $223 million, or $1.97 per share, on $5.51 billion in revenue for the first quarter of 2010. A year ago, Magna had a net loss of $200 million, or $1.79 per share, on $3.57 billion revenue. The figures are in U.S. currency.

Shares finished up $7.41, at $69.94, on the New York Stock Exchange.