MI Developments Board of Directors Recommends Shareholders Vote Against Greenlight Capital Proposals
April 04 2005 - 9:15AM
PR Newswire (US)
MI Developments Board of Directors Recommends Shareholders Vote
Against Greenlight Capital Proposals Announces 67% Increase in 2005
Dividend to $0.60 per Share AURORA, ON, April 4
/PRNewswire-FirstCall/ -- MI Developments Inc. (TSX: MIM.SV.A,
MIM.MV.B; NYSE: MIM) today announced that, based on the
recommendations of a Special Committee of independent directors,
the Board of Directors unanimously recommends that shareholders
vote against two resolutions proposed by hedge funds managed by
Greenlight Capital, Inc. The Board's recommendation is included in
a Management Information Circular in respect of the Company's
Annual and Special Meeting to be held on May 4, 2005, which was
filed today with securities commissions in Canada and the United
States and is also available on MID's website at
http://www.midevelopments.com/. Among the other matters to be
considered at the meeting, shareholders will vote on the
resolutions included in a January 18, 2005 requisition from
Greenlight Capital. The "MEC Separation Resolution" proposes that
MI Developments sell or distribute to MID shareholders its 59%
equity (96% voting) interest in Magna Entertainment Corp. (MEC).
The "REIT Conversion Resolution" proposes that MI Developments
convert to an income-oriented investment vehicle such as a real
estate investment trust (REIT). "After thorough and independent
analysis over the past two months, the Special Committee determined
that it is not in the best interests of the Company or its
shareholders to pursue either of these fundamental corporate
changes at this time," said Douglas Young, Chairman of the Special
Committee of the Board. "We continue to view MEC as a strategic
investment and believe there is significant potential upside value
in MEC that we might jeopardize by spinning off or selling MEC now.
We also don't believe it is currently necessary to become a REIT to
increase the return on equity of our real estate business and
enhance value for our shareholders." The Board also adopted a
number of additional recommendations made by the Special Committee
regarding MID's investment in MEC and the refinement of MID's
financing strategy to enhance shareholder value by increasing
leverage over time to fund capital expenditures and the return of
capital to shareholders. Consistent with these recommendations, the
dividend payable on MID's shares for 2005 will be increased to
$0.60 per share, commencing with the dividend payable in respect of
the first quarter of 2005. While MI Developments' Chairman and
controlling shareholder Frank Stronach expressed reservations about
certain aspects of these additional recommendations, he deferred to
the judgment of the Special Committee. "My belief is that a
relatively young growth company like MID should not use its cash
flow to pay significant dividends or take on debt solely to
increase leverage," said Mr. Stronach. "However, I recognize that
the Board is responsible to all shareholders and, based on the
extensive analysis conducted by the Special Committee, I voted in
favour of its recommendations." As well as Mr. Young, the Special
Committee consists of Philip Fricke and Manfred Jakszus, each of
whom has been determined by the MID Board of Directors to be
independent of MEC, MID's management and Mr. Stronach. The Special
Committee retained Goodmans LLP as its independent legal advisor
and CIBC World Markets Inc. as its independent financial advisor.
These advisors, as well as the Company's management and its
financial and legal advisors, assisted the Special Committee in the
review that led to its recommendation that the Board of Directors
recommend that shareholders vote against the Greenlight Capital
resolutions. The Board of Directors Recommends That Shareholders
Vote AGAINST the MEC Separation Resolution With Mr. Stronach and MI
Developments' Vice Chairman Dennis Mills abstaining, having
declared their interest as directors and officers of MEC, the Board
unanimously recommends that shareholders vote against the MEC
Separation Resolution. The Board adopted the Special Committee's
recommendation that selling or spinning off MEC at this time is not
in MID's or its shareholders' best interests for several reasons,
including: - MEC remains a strategic investment for MID, providing
the Company with potential development opportunities. - MEC expects
to report a net loss for 2005, following losses for the three
previous years, and would require a substantial capital investment
in order to fund its planned operations and strategic plan. It is
not currently in MID's best interest to make an investment of this
magnitude in order to facilitate a spin-off. - The resulting
uncertainty from a spin-off of MEC without adequate capitalization
would impair MEC's ability to successfully execute its strategic
plan. The terms of any financing that MEC might be able to raise in
such circumstances would likely be significantly disadvantageous to
MEC and its shareholders (including MID shareholders who would
receive MEC shares if it were spun off). - MEC has identified cost
and operational improvements that increase the probability that it
will be able to successfully execute its core business strategy,
particularly with MID's disciplined involvement. As it is
implemented, the strategy should, in time, create significant
future shareholder value for all MEC shareholders, including MI
Developments. - Provided that MEC successfully addresses certain
financial and operating issues, it appears to be poised for a
significant increase in value. It is unlikely that the market would
fully reflect the potential value from these opportunities in MEC's
share price if MEC were spun off now, or that MID would realize the
potential value if it sold its interest in MEC at this time. -
Potential benefits from the sale or spin-off of MEC would not be
lost by making the disposition at a later time. The Board of
Directors Recommends That Shareholders Vote AGAINST the REIT
Conversion Resolution The Board also unanimously recommends that
shareholders vote against the REIT Conversion Resolution. It
concluded that converting MI Developments to an income-oriented
investment vehicle at this time is not in MID's or its
shareholders' best interests for a number of reasons, including: -
No material tax benefit would be achieved by the conversion of the
Company into a REIT that could not be achieved in its current
corporate form. - A REIT or similar structure is not required for
the Company to achieve its goal of increasing return on equity over
time. MID can increase its leverage, as it did in December 2004,
and can increase the distributions to shareholders, without
conversion. - MI Developments can enhance return on equity for its
shareholders through a combination of increased leverage to fund
capital expenditures on real estate and other opportunities
consistent with its strategy and the return of capital to
investors. It can do this without the expense of a conversion and
the limitations a REIT or similar structure would place on its
business. - In contrast to REITs, the Company has a history of
higher growth through active development rather than acquisitions.
MID has different operating characteristics and portfolio
attributes than REITs, particularly as a result of its relationship
with its major tenants, the Magna automotive group of companies,
and the geographic diversity of its rental portfolio. - Total
returns to Company shareholders have been more than twice those of
the Company's REIT peers since MID became a public company in
August 2003. Additional Recommendations The Board of Directors has
also analyzed and considered certain additional recommendations of
the Special Committee and unanimously determined to adopt those
additional recommendations in all material respects. Mr. Stronach
and Mr. Mills abstained on recommendations relating to MEC. The
Board determined that MI Developments should refine its financing
strategy to further enhance shareholder value by increasing the
Company's return on equity by: - increasing financial leverage in a
disciplined manner over a reasonable period of time consistent with
MID's business strategy through a combination of increased capital
expenditures and return of capital to shareholders. The Board's
current target for the MID real estate business is a debt to
capitalization ratio of 35% within approximately five years, -
establishing a policy to regularly increase dividends based on
factors including funds from operations per share and prudent use
of capital, and - repurchasing its shares as appropriate
opportunities arise through a normal course issuer bid. Consistent
with these goals, the Board of Directors has determined that the
annual dividend payable to holders of the Company's Class A
Subordinate Voting Shares and Class B Shares for 2005 will be
increased to $0.60 per share, a 67% increase over the 2004 dividend
of $0.36 per share. In addition, the Board has: - determined that,
to minimize the possible adverse impact on MID's investment in MEC
of unfavourable third party financings, MI Developments should be
prepared to consider providing funds to allow MEC to address any
short-term liquidity concerns, and - directed management to work
closely with MEC to maximize the return on the Company's existing
investment in MEC and ensure appropriate returns on any additional
investment in MEC by, among other things (i) critically examining
the funding necessary for execution of MEC's strategic plan, (ii)
establishing a more stable capital structure for MEC to pursue its
strategy, and (iii) assessing all reasonable financing alternatives
on the basis that such financing should enhance MEC shareholder
value. The Board of Directors determined that it should regularly
evaluate the additional recommendations based on developments in
MID's business, opportunities that may arise, and other
circumstances existing from time to time. The recommendations of
the Board of Directors and its reasons are described in greater
detail in the Management Information Circular that will be mailed
to the MID shareholders shortly in connection with the annual and
special meeting of shareholders to be held on May 4, 2005 at Le
Royal Meridien King Edward Hotel, 37 King Street East, Toronto,
Ontario, Canada, commencing at 10:00 a.m. (Toronto time).
Shareholders who are unable to be present at the Meeting in person
should complete, date and sign the proxy that will be enclosed with
the Management Information Circular and return it in accordance
with the instructions set out in the Management Information
Circular. To be effective, proxies must be received prior to 5:00
p.m. (Toronto time) on May 2, 2005. Shareholders with questions
about how to vote their shares should contact our proxy solicitor
as follows: MORROW & CO., INC. Individuals Call Toll Free:
1-800-607-0088 Banks and Brokers Call Toll Free: 1-800-654-2468
Shareholder Conference Call MID will host a conference call
co-chaired by John D. Simonetti, Chief Executive Officer, and M.
Douglas Young, Lead Director and Chairman of the Special Committee,
at 10:30 a.m. (Toronto time) today. The number to use for this call
is 1-800-814-3911. The number for overseas callers is 416-640-1907.
Please call 10 minutes prior to the start of the conference call.
MID will also webcast the conference call at
http://www.midevelopments.com/. Business media are invited to
participate in the conference call in listen-only mode and to
contact the Company for further information. About MI Developments
Inc. MI Developments is a real estate operating company focusing
primarily on the ownership, leasing, management, acquisition and
development of a predominantly industrial rental portfolio for
Magna International Inc. and its subsidiaries in North America and
Europe. The Company also holds a controlling investment in Magna
Entertainment Corp., North America's number one owner and operator
of horse racetracks, based on revenue, and among the world's
leading suppliers, via simulcasting, of live horse racing content
to the growing inter-track, off-track and account wagering markets.
Forward-Looking Statements The contents of this press release may
contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements may include, among
others, statements regarding MID's future plans, costs, objectives
or economic performance, or the assumptions underlying any of the
foregoing. In this press release we use words such as "will",
"expect", "should" and similar words to identify forward-looking
statements. Forward-looking statements should not be read as
guarantees of future performance or results, and will not
necessarily be accurate indications of whether or the times at or
by which such future performance will be achieved. Forward-looking
statements are based on information available at the time and/or
management's good faith belief with respect to future events and
are subject to known and unknown risks, uncertainties and other
unpredictable factors, many of which are beyond MID's control, that
could cause actual results to differ materially from such
forward-looking statements. Such risks, uncertainties and other
factors are set forth under "Risk Factors" in MID's Annual
Information Form for 2004, attached as Exhibit 1 to MID's Annual
Report on Form 40-F for the year ended December 31, 2004. MID
expressly disclaims any intention and undertakes no obligation to
update or revise any forward-looking statements to reflect
subsequent information, events or circumstances or otherwise.
DATASOURCE: MI Developments Inc. CONTACT: Investors: John
Simonetti, Chief Executive Officer, MI Developments Inc., (905)
726-7619; Media: John Lute, Lute & Company, (416) 929-5883
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