Opposition is mounting against Magna International Inc.'s proposal to give founder Frank Stronach a big payout in return for getting rid of the company's dual-class share structure.
Mutual fund company Northwest & Ethical Investments L.P. (NEI) is joining the Canadian Pension Plan Investment Board and Ontario Teacher's Pension Plan in publicly stating its intention to vote against the proposal by the auto parts giant at a June 28th meeting. See Globe story
"NEI is concerned about the high price tag shareholders are expected to pay as well as the lack of guidance provided by the special committee of the board that has examined this proposed transaction in detail," Bob Walker, vice-president of sustainability for the fund company, said Thursday. "As much as we dislike dual-class shares, the price being asked for is too high and not justified…We simply don't believe that the proposed transaction is in the best interests of shareholders."
Magna has offered to pay Mr. Stronach $300-million (U.S.) in cash plus grant him nine million new subordinate-voting shares of the company for a total value of $863-million. The big pension plan players have argued that the creation of the new shares will dilute the value of the 112 million Magna shares that investors currently hold.
NEI is troubled by what it describes as the "questionable role of the special committee of the board established to consider and review the proposal." After 11 meetings over a month, this committee is unable to make a recommendation to shareholders who are now expected to make a decision without analysis from experts that it has at its disposal, the fund company said.