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Major pension funds still oppose Magna plan

TORONTO - Some of Canada's most prominent pension funds say they still intend to vote against a share restructuring plan by Magna International Inc. despite the company's disclosure of more information.

TORONTO - Some of Canada's most prominent pension funds say they still intend to vote against a share restructuring plan by Magna International Inc. despite the company's disclosure of more information.

The Ontario Teachers' Pension Plan, the Canada Pension Plan Investment Board, Alberta Investment Management Corp. and British Columbia Investment Management Corp. all confirmed Tuesday that they plan to vote "no" to a proposal that would see Magna pay founder Frank Stronach more than $1 billion to give up his voting control of the company.

The shareholders were not swayed by securities filings by Magna last week, that including previously unreleased details on the plan at the behest of the Ontario Securities Commission.

An independent panel appointed by the commission ruled that shareholders were not initially given enough information to make an informed decision on the proposal, which is controversial for the huge premium — about 1,800 per cent — it would pay Stronach to give up his special class of voting shares.

Teachers' said Tuesday that it still opposes the Magna proposal even after reviewing the company's revised circular ahead of a July 23 shareholder vote on the plan. The fund said the new disclosure didn't give any more assurance that the proposal is fair to the subordinate voting shareholders of Canada's largest auto parts company.

"Alarmingly, none of the additional disclosure provides any comfort to class A shareholders that Magna's board believes that the transaction is in the best interests of the organization," stated Wayne Kozun, Teachers' senior vice-president of public equities.

The additional information also doesn't address the "root problem" with the proposal, said Leo de Bever, CEO and chief investment officer of Alberta Investment Management Corp., or AIMCo.

"I think Mr. Stronach has been very generous to himself over the years, so it's hard to argue that over the years he didn't get rewarded for the effort he put in," de Bever said in an interview.

"The bottom line is we still don't think this is a justifiable premium."

De Bever said AIMCo intends to express its concerns to the court, which will be asked to review the transaction if it is approved by shareholders next week.

"I don't think any court is going to pass judgment on the exact number (to be paid to Stronach), but it might help lay down some principles as to how you should look at these things and arrive at the correct number," he said.

Both the CPP Investment Board and B.C. Investment Management Corp. also indicated that they will continue to oppose the proposal, saying earlier statements to that effect still stand.

Under the Magna plan, Stronach would give up his multiple-voting shares which he uses to control the company in exchange for consulting fees, cash, and Magna stock worth more than $1 billion, plus control over a joint venture that will develop components for electric vehicles.

Shareholders who support the deal say it will unlock a significant amount of value in Magna's stock, which has traded lower than its peers because of the company's dual-class share structure. Dual-class structures tend to scare away some investors because they don't give common shareholders control over how the company is run.

Magna has said a majority of shareholders have already voted in favour of the restructuring.

The Stronach Trust, consisting of Stronach and his family, indirectly owns all of the 726,829 outstanding class B shares in the company. Each of the super-voting shares has 300 votes, giving the family-controlled trust about 66 per cent of the voting rights at Magna with less than one per cent of the equity.

Magna is Canada's largest auto parts company, with 74,000 employees, 240 manufacturing plants and 76 product development, engineering and sales centres in 25 countries.

Shares in Magna (TSX:MG.A) added $2.90 or more than four per cent to $73.87 in Tuesday trading on the Toronto Stock Exchange. The company's stock has gained more than 14 per cent since the deal was first announced in early May.

 
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