Magna Restructuring Survives Appeal

After earlier this month the Ontario Superior Court approved Magna's proposed plan to eliminate the current dual class share structure, the plan was reconfirmed by an appeal court, which denied the action filed by a group of dissident shareholders and gave another green light to the project.

Magna is still operating under a dual share structure, divided between stockholders and the Stronach family, represented by the company's founder, Frank Stronach. The founder owns so called Class B stock which give him 66 percent of voting rights in the company (each Class B share carries 300 votes).

Magna plans to pay the founder $863 million in cash and Class A shares (or a total compensation worth $984 million), while the Class B shares will be canceled.

The group which opposed the plans comprised the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers' Pension Plan. The group was saying the plan to pay the above amount of money to the founder was unreasonable.

"We are disappointed with the outcome, but accept today's ruling by the Divisional Court of the Ontario Superior Court of Justice and will not appeal that decision," CPPIB said in an e-mail sent to just-auto.com.

"As an ongoing shareholder of Magna, we intend to engage with the company on its governance structure and practices under the revised ownership arrangement."

Magna's management was expecting such a move, with the current decision pretty much putting an end to a several months long battle. The 30 day term during which an appeal could be filed is nearing its end.