Frank Stronach, founder of Magna International Inc., is encountering bumps as he enters the electric vehicle business.
Last month Magna proposed to buy the Stronach Trust's controlling position in the Canadian supplier giant. A special class of stock gives the trust a majority of voting rights.
In the deal, Stronach's trust would get 9 million shares of regular stock and $300 million in cash. Magna and Stronach, 78, would establish a joint venture to operate Magna's E-Car Systems group, which integrates electric technology. The trust would appoint three of the venture's five board members.
In return, shareholders should see stock prices rise. Magna says the company's shares have been undervalued because of the trust's voting control.
The issue is scheduled to be settled in a shareholder meeting on Monday, June 28. But the Ontario Securities Commission has scheduled a hearing on Wednesday, June 23, that could derail the deal.
FAIR Canada, an investors' rights organization, says the trust would receive an 1,800 percent premium for its stock and would, in effect, be rewarded for minimizing the value of other shareholders' stock.
"This case creates perverse incentives for controlling shareholders to oppress public shareholders," a FAIR Canada statement said.
Magna says that 24 percent of shares have been voted, running 99 percent in favor of the deal.