TORONTO (Reuters) -- Magna International Inc. today gave into regulator and shareholder demands to provide them with more information about its controversial plan to pay its founder and chairman nearly $900 million to cede control of the company.
The Ontario Securities Commission on Wednesday challenged the world's No. 5 auto supplier's proposal to eliminate its dual-class structure by paying Frank Stronach a significant premium for his Class B shares, through which he controls Magna.
The dual-share structure has long been a sore point for investors -- each Magna Class A share carries one shareholder vote, while each Class B share carries 300 -- and the Magna proposal is scheduled to go to a shareholder vote on June 28.
Magna said on Wednesday that more than 24 percent of its shares outstanding had been voted thus far, with more than 99 percent in favor of the proposed transaction.
'Contrary to the public interest...'
However, after several shareholders voiced concerns about the fairness of such a handsome payday for Stronach, the OSC called for a hearing on June 23 that threatens to dash the plan, or place terms and conditions on it that would need to be met for it to go ahead. A preliminary hearing is scheduled for Friday.
The OSC said the plan, as is, would be "contrary to the public interest and harmful to the integrity of the Ontario capital markets."
The commission also said that Magna should have given shareholders more information on the proposal, including a valuation of its subject matter, a detailed discussion of its fairness, an opinion as to its fairness from a financial point of view, and adequate disclosure of the background to, and negotiations surrounding the arrangement.
In response to the OSC's complaints, Magna released on its Web site a presentation, titled "Project Raven," on the arrangement that was prepared by its financial adviser, CIBC World Markets.
It also made available a report from PricewaterhouseCoopers LLP on the estimated fair market value of Magna's electric vehicle business, which would be a Stronach-controlled spin-off of the deal if approved by shareholders.
"Magna strongly believes that its existing disclosure is entirely appropriate and contains all information necessary to enable minority shareholders to make a reasoned judgment about the transaction," the company said in a release.
"Nevertheless, Magna is providing this additional disclosure in response to the concerns expressed by OSC staff and with a view to providing such information sufficiently in advance of the shareholder vote."
Magna says the plan to eliminate the dual-share structure would unlock shareholder value and boost its valuation.
The company's stock surged as much as 23 percent in May when the company announced the proposal to rid itself of the Class B shares.
Magna ranks No. 5 in the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $17.37 billion in 2009.