Frank Stronach, chairman of MI Developments who has been battling minority shareholders for more than six years, is giving them a chance to cash out in another attempt to restructure the real estate and horse racing empire he controls.
The latest reorganization effort is a $13-a-share ( U.S.) offer to purchase all the single-vote class A shares and multiple-vote class B shares not already controlled by Mr. Stronach and his affiliated companies.
That price represents a 22-per-cent premium on the closing price of $10.67 for the class A shares on the New York Stock Exchange on Friday. The takeout offer was made public after stock markets closed.
MI Developments will convene a board of directors meeting Monday morning and "at the appropriate time, the board will make the appropriate disclosure," the company's chief executive officer Dennis Mills said Sunday.
The latest move by Mr. Stronach follows a major realignment this summer of his holdings in Magna International Inc., the auto parts company he founded in 1957 that is now one of the world's largest and whose growth and prosperity ultimately led to the creation of MI Developments, a real estate company, and Magna Entertainment Corp. (MEC), a horse racing and gambling company.
In the Magna International deal, Mr. Stronach surrendered his multiple voting shares in the auto parts company for $300-million in cash and $550-million worth of single-vote class A shares, ending the iron grip under which he had controlled Magna since 1978.
The cash from that deal could be used to backstop the purchase of the MI shares he doesn't own, which were worth $549.5-million at the $13 takeout price.
Over the past five years, however, Mr. Stronach has shelved several deals involving MI and MEC amid virulent opposition from minority shareholders.
Much of the shareholder outrage stemmed from the constant flow of money from the real estate company to MEC, in which MI held a 60-per-cent stake. The racetrack company tumbled into Chapter 11 bankruptcy protection in the U.S. in March, 2009.
The shareholder opposition has included lawsuits, Ontario Securities Commission challenges, the torpedoing of more than one attempt to take MEC private and a leading member of that opposition taking the podium at an MI annual meeting and comparing Mr. Stronach to Cuban dictator Fidel Castro.
That was David Einhorn, founder of New York hedge fund Greenlight Capital Inc., which predicted in March, 2008, that MI was ripe for a privatization bid by Mr. Stronach when its shares fell to $21.55.
The world has changed dramatically since then, including the Chapter 11 filing by MEC, but MI picked up several of MEC's racetracks.
Mr. Stronach's vision for the future of the horse racing industry is to replicate at some of those tracks what he has done at Gulfstream Park near Miami, which is to turn the facility into a destination.
That involved spending several hundred million dollars creating a retail and entertainment complex financed mainly by loans from MI. Those loans contributed to the $500-million plus in debt that eventually forced MEC into Chapter 11.
MI said as recently as its second-quarter financial report this summer that it was working on a forbearance agreement that would govern how it handles investments in the racetrack properties it picked up from MEC, which includes Santa Anita Park near Los Angeles. It has not announced any details of that plan.
But going private would allow Mr. Stronach to invest in the racetrack properties without facing criticism and court challenges from minority shareholders. He would also face no minority shareholder opposition if MI were to purchase the Magna Racino in Vienna, which Mr. Stronach bought personally when MEC went into Chapter 11.