Frank Stronach will step down as chairman and chief executive officer of MI Developments Inc. if shareholders approve a deal that gives him the firm's racetrack and gambling assets in return for surrendering control of the company.
Wes Voorheis, a Toronto lawyer who represented minority shareholders in negotiations on the transaction, will become chairman. William Lenehan, a former managing director of Farallon Capital Management LLC, one of the largest minority shareholders, will become chief executive officer.
They will head what will become a pure real estate company once such entities as Gulfstream Park in Florida, Santa Anita Park and Golden Gate Fields in California, MI Developments' share of two tracks in Maryland and some real estate and electronic gambling assets are transferred to Mr. Stronach.
The real estate company, which controlled Magna Entertainment Corp. before it went into Chapter 11 bankruptcy protection in 2009, will end up holding 106 properties with a book value of about $1.2-billion (U.S), according to the circular for the meeting, where shareholders will vote on the deal next month. Magna International Inc., the auto parts giant Mr. Stronach founded in 1957, generates 98 per cent of the rental revenue.
The real estate properties include Magna's massive Magna Steyr vehicle assembly operation in Graz, Austria.
Mr. Stronach is receiving assets worth between $585-million and $730-million, the circular says, which represents between $1,610 and $2,009 for each class B, multiple-voting share he holds. The 78-year-old entrepreneur has controlled MI Developments through those multiple-voting shares since the real estate company was spun off from Magna in 2003.
That's a higher value than the $1,200 per multiple voting share in Magna International that Mr. Stronach received last year when he gave up control of that company in return for $863-million in cash and common shares.
The difference in the MI Developments buyout is that Farallon and other large institutional shareholders have badgered the company for years to sever its racetrack and gambling assets. They have launched challenges at the Ontario Securities Commission and in Ontario Superior Court urging those moves and seeking to force the real estate company to end its long-time role as the bank of last resort for Magna Entertainment, which posted losses of more than $500-million before going into Chapter 11.
One of the conditions of the deal is that a shareholder group that includes Farallon end a lawsuit that was filed last year against the company, the board of directors, Mr. Stronach and current and former executives.
The shareholder group includes such institutions as Hotchkis and Wiley Capital Management LLC, Owl Creek Asset Management LP and Pzena Investment Management LLC.
Shareholders owning more than 50 per cent of MI Developments' shares have filed support agreements showing that they will vote in favour of the deal.
The company's board is recommending shareholders approve the transaction.
Mr. Voorheis and Mr. Lenehan will be two members of a totally new board of directors that will also include Peter Dey, former chairman of the OSC and a long-time advocate of improved corporate governance.