A peace agreement between Frank Stronach and minority shareholders of MI Developments marks the end of an era during which the controversial entrepreneur controlled a publicly traded empire spanning auto parts, real estate and racetracks.
After a day-long halt in trading of its shares, MI Developments said Wednesday the 78-year-old will take over its horse racing assets and $20-million (U.S.) in working capital in return for giving up the multiple voting shares with which he has controlled MI Developments since it went public in 2003.
Shares of the company soared 45 per cent on the news. MI will become a pure real estate company with no controlling shareholder.
The company's ownership of racetracks through control of now-failed Magna Entertainment Corp., along with hundreds of millions of dollars in loans MI provided to MEC, riled minority shareholders and caused years of battles with Mr. Stronach.
In a controversial deal earlier this year, Mr. Stronach gave up the multiple voting shares with which he controlled auto parts giant Magna International Inc. He remains chairman of that company, which he founded in a Toronto garage in 1957.
He also controls an electric vehicle business set up as a private joint venture with Magna as part of the deal to sell his controlling stake in the auto parts company.
During his time as chairman and controlling shareholder of Magna and the other companies in his empire, the Austrian-born entrepreneur has been among the most controversial figures in Canadian business - even while building the company into a colossus that is now among the largest auto-parts makers in the world.
His compensation from Magna, which regularly ran into the tens of millions of dollars annually, earned him heavy criticism from shareholders. He battled for years with the Canadian Auto Workers before reaching a peace deal that allowed the union to organize some of his plants. He lectured governments, business leaders, unions, the media and others with yearly sermons at Magna's annual meetings.
He said Wednesday he will remain as chairman and chief executive officer of MI Developments if the shareholders ask him to after the deal closes by June 30, 2011.
Establishing a new public company that will hold racing assets such as Gulfstream Park in Florida, Santa Anita in California and other tracks is unlikely, he said.
"I really believe there's good upside in the racing and gaming assets," he said, even though horse racing appears to be a dying business as casinos, slot parlours and Internet gambling grow rapidly while the amount of money wagered on horses declines.
It will take some time, he acknowledged, before the racing and gambling assets will turn a profit.
"There's a lot of government regulations; some of them have to be changed," he said. "When you own assets, you should have the right within the legal framework to make the most profits you can with that. But we can't. We've got government regulations and the horsemen have a great say in how the business should be run. That doesn't work."
Eight of the largest 10 shareholders in MI, who control more than 50 per cent of the company's common shares, support the deal, the company said in a statement.
Among the conditions is that five of the company's 12 largest shareholders drop a lawsuit they had filed in Ontario Superior Court against Mr. Stronach and several of the company's officers and directors.