DETROIT (Bloomberg) -- Magna International Inc.'s proposal to end founder Frank Stronach's control of North America's largest supplier is being opposed by one of its large investors.
The Canada Pension Plan Investment Board, the country's second- biggest retirement fund manager, said today it will vote against a May 6 agreement between Magna and the Stronach Trust that eliminates the dual-class share structure.
The plan, scheduled for a shareholder vote at a June 28 meeting, would give the trust about $863 million in cash and shares.
“We haven't often seen a proposal as egregious as this one,” Canada Pension CEO David Denison said in an interview. The price shareholders would pay to eliminate Magna's dual-class share structure “is totally unreasonable and inappropriate.”
Magna's proposal is in response to criticism of its ownership structure that allowed Stronach, the chairman, to wield control over the company and its strategy. Through its ownership of Magna Class B shares, which are each equivalent to 500 Class A shares, the Stronach family controls more than two- thirds of voting rights at the company based in suburban Toronto.
The proposal calls for the Stronach Trust to get 9 million new Class A shares, or a 7.4 percent stake, and $300 million in cash.
“We see this as a very negative precedent to have in the marketplace if it is allowed to go ahead,” Denison said. “It is a terrible precedent, in our mind.”
The Canada Pension fund owns 1.09 million Magna shares, or about 1 percent of the Class A shares, according to Bloomberg data.
A Magna spokeswoman, Tracy Fuerst, declined to comment.