TORONTO — Despite all the brouhaha around Magna International Inc.’s proposal to buy out founder Frank Stronach’s voting control at a huge premium, it will ultimately make little difference in how the auto parts giant is run, according to one analyst.
“The company has been running in a pretty normal manner and probably will continue to do so going forward,” David Tyerman, auto parts analyst at Genuity Capital Markets, said Tuesday.
“I don’t think Mr. Stronach has been making decisions in the last few years that would be much different than the management team has.”
This means Magna’s recent strategies of expansion into Russia and other non-traditional markets, as well as diversifying into products outside the automotive market, will continue apace whether or not Stronach and his family retain voting control over the company.
Magna has come under fire from shareholders, regulators and investors’ rights groups over its proposal to buy out Stronach’s special voting shares for US$300 million and nine million common shares worth $643 million — a premium of approximately 1,800 per cent.
Detractors have accused the company of failing to provide enough information for shareholders to make an informed decision when they are asked to vote on the plan. Magna’s board of directors hasn’t recommended how shareholders should vote, as is usually the case in transactions like this. An opinion on the fairness of the deal hasn’t been issued, nor have details on how the company arrived at the huge premium to be paid to Stronach.
The Ontario Securities Commission will hold a hearing Wednesday and Thursday to determine whether the proposal should be quashed if more information isn’t provided. The regulatory body has called the proposal “contrary to the public interest and harmful to the integrity of the Ontario capital markets.”
Shares in Magna (TSX:MG.A) added $2.02 or nearly three per cent to $71.31 in afternoon trading on the Toronto Stock Exchange.
