AURORA, ON, Jan. 31 /CNW/ -- AURORA, ON, Jan. 31 /CNW/ - MI
Developments Inc. ("MID") (TSX: MIM.A, MIM.B; NYSE: MIM) announced
today that it has entered into definitive agreements with respect
to the reorganization proposal disclosed on December 22, 2010 which
contemplates the elimination of MID's dual class share capital
structure through which Frank Stronach and his family control MID.
The reorganization proposal was made by holders of MID's Class A
Subordinate Voting Shares representing in excess of 50% of the
outstanding Class A Subordinate Voting Shares (the "Initiating
Shareholders"), including eight of MID's top ten shareholders, and
is supported by MID's controlling shareholder (the "Stronach
Controlling Shareholder"), which holds 57% of the votes attaching
to MID's outstanding shares. Each of the Initiating Shareholders
and the Stronach Controlling Shareholder has agreed to vote in
favour of the proposed reorganization. In addition,
shareholders representing in excess of 50% of the outstanding Class
B Shares held by minority shareholders have also agreed to vote in
favour of the proposed reorganization. Neither MID management nor
the MID Board was involved in the negotiation of the reorganization
proposal received on December 22, 2010. The proposed reorganization
will be implemented pursuant to a court-approved plan of
arrangement under the Business Corporations Act (Ontario).
The shareholders' meeting to consider the arrangement is expected
to take place in late March of this year. The arrangement will
require the approval of at least: (i) 66⅔% of the votes cast by the
holders of Class B Shares and Class A Subordinate Voting Shares,
voting together as one class, (ii) 66⅔% of the votes cast by
holders of Class B Shares, voting separately as a class, (iii) a
majority of the votes cast by minority Class A shareholders, and
(iv) a majority of the votes cast by minority Class B
shareholders. The votes represented by the Stronach
Controlling Shareholder, the Initiating Shareholders and the
supporting minority holders of Class B Shares will be sufficient to
satisfy all of such voting thresholds. The arrangement also
requires approval by the Ontario Superior Court of Justice at a
hearing to be held following the shareholders' meeting. If
approved, the arrangement is expected to close by the earlier of
June 30, 2011 and the receipt of an advance income tax ruling from
the Canada Revenue Agency which will be applied for in connection
with the reorganization proposal. Following receipt of the
reorganization proposal on December 22, 2010, the Board of
Directors of MID constituted a Special Committee of independent
directors of MID to review the reorganization proposal and make
recommendations to the MID Board. The MID Board has approved the
entering into by MID of the definitive agreements and recommended
that shareholders (other than the Stronach Controlling Shareholder
and the shareholders who have executed support agreements as of the
date hereof) vote in favour of the proposed reorganization after
receiving the recommendation of the Special Committee. The Special
Committee received independent legal advice from Borden Ladner
Gervais LLP. The Special Committee retained Blair Franklin
Capital Partners Inc. ("Blair Franklin") to prepare independent
formal valuations and to provide certain other financial
analysis. MID received legal advice from Davies Ward Phillips
& Vineberg LLP. Terms of the Transaction The reorganization
proposal contemplates the elimination of MID's dual class share
structure through: -- The cancellation of all 363,414 Class B
Shares held by the Stronach Controlling Shareholder upon the
transfer to the Stronach Controlling Shareholder of MID's
horseracing, gaming and certain real estate development and other
assets (and associated liabilities), and US$20 million of working
capital as of January 1, 2011 (the " Assets"). The Assets include:
Santa Anita Park; Golden Gate Fields; MID's joint venture interests
in Maryland Jockey Club's real estate and racing assets (Pimlico
Race Course, Laurel Park and the Bowie training facility);
Gulfstream Park and MID's joint venture interest in the associated
retail development; Portland Meadows; horseracing technology assets
including Xpressbet® and AmTote; and substantially all properties
owned by MID as described under "Real Estate Business - Development
Properties" in note 6 (a) of the notes to the amended and restated
interim consolidated financial statements of MID for the period
ended September 30, 2010. -- The purchase for cancellation by MID
of each of the other 183,999 Class B Shares in consideration for
1.2 Class A Subordinate Voting Shares, which following cancellation
of the Class B Shares will be renamed Common Shares. Upon
completion of the reorganization proposal, MID will retain its
income producing real estate property business and will be
restricted from engaging in, or having an interest in, directly or
indirectly, any business relating to horse racing or gaming, and
the Board of Directors of MID will be comprised of directors
elected by shareholders at the shareholders' meeting, with the
nominees for election being proposed by the Initiating
Shareholders. The proposed Board of Directors following
completion of the reorganization proposal will be identified in the
management information circular to be mailed to shareholders in
connection with the shareholders' meeting to approve the
reorganization proposal. Until the completion of the reorganization
proposal, the Assets (including MID's racing and gaming business)
are to be operated separately from the real estate business of MID,
except that MID will contribute to the Assets cash in the amount of
US$2.5 million in respect of January 2011 and US$3.8 million per
month in respect of the period from February 1, 2011 to closing of
the reorganization proposal. The Stronach Controlling
Shareholder will have a right of second refusal in respect of the
Magna International corporate properties in Aurora, Ontario and in
Oberwaltersdorf, Austria and a right of first refusal in respect of
the MID corporate headquarters in Aurora, Ontario. In
addition, effective upon closing, the applicable Initiating
Shareholders will dismiss without costs the litigation against MID
and certain related parties filed with the Ontario Superior Court
of Justice and the Initiating Shareholders, the Stronach
Controlling Shareholder and MID will provide mutual releases,
including to the directors and officers of MID. MID has
agreed to reimburse the Initiating Shareholders for their
reasonable legal and advisory fees incurred in connection with the
reorganization proposal and up to US$1 million for other legal and
advisory fees, and to reimburse the Stronach Shareholder for up to
US$1 million of legal and advisory fees incurred in connection with
the reorganization proposal. The principal closing conditions of
the reorganization proposal include receipt of required MID
shareholder approvals, receipt of court approvals, there being no
material adverse change in the affairs of MID, and implementation
of the reorganization proposal by June 30, 2011. Recommendation of
the Board and the Special Committee In approving the definitive
agreements and making its recommendation that shareholders (other
than the Stronach Controlling Shareholder and the shareholders who
have executed support agreements as of the date hereof) vote in
favour of the reorganization proposal, the Board of Directors and
the Special Committee considered the formal valuations prepared by
Blair Franklin and a number of factors relating to the substantive
and procedural fairness of the reorganization proposal. As required
by applicable securities laws, Blair Franklin prepared a formal
valuation of the Assets under the supervision of the Special
Committee and determined that, subject to the assumptions,
qualifications and limitations contained therein, the fair market
value of the Assets was in the range of US$585 million to US$730
million or approximately US$1,610 to US$2,009 per Class B Share
held by the Stronach Controlling Shareholder. Blair Franklin
also prepared a formal valuation of the Class B Shares (with the
Class B Shares treated as being identical in all terms with the
Class A Subordinate Voting Shares for purposes of the valuation and
with no adjustments to reflect whether the Class B Shares form part
of a controlling interest) and of the renamed Common Shares which
are to be received by the holders of Class B Shares (other than the
Stronach Controlling Shareholder) and which are also the shares
that will be retained by the existing holders of Class A
Subordinate Voting Shares following implementation of the
reorganization proposal. Blair Franklin determined that,
subject to the assumptions, qualifications and limitations
contained in its formal valuation, the fair market value of the
Class B Shares was in the range of US$42 to US$50 per share and
that the fair market value of the renamed Common Shares was in the
range of US$29 to US$34.50 per share, implying consideration of
US$34.80 to US$41.40 per Class B Share (other than Class B Shares
held by the Stronach Controlling Shareholder). The principal
factors relating to substantive fairness considered by the Board
and the Special Committee were as follows: -- The reorganization
proposal was negotiated on an arm's length basis between the
Initiating Shareholders, on the one hand, and the Stronach
Controlling Shareholder, on the other hand. The Initiating
Shareholders include sophisticated, Canadian and U.S. based fund
managers many of whom have been long time investors in MID and who
have substantial holdings of Class A Subordinate Voting Shares. --
The current trading price of the Class A Subordinate Voting Shares
indicates that either or both of the existence of the dual class
share structure of MID and MID's continued financial support of its
racing and gaming business has had a negative effect on the trading
price of the Class A Subordinate Voting Shares relative to the
trading price of the Class A Subordinate Voting Shares which would
otherwise result if MID eliminated its dual class share structure
and disposed of its interest in its racing and gaming business and
traded solely on the basis of its real estate business. However,
the Board and the Special Committee cannot provide any assurances
as to future trading prices or the basis on which investors or
analysts will assess MID. -- The value to be received by the
Stronach Controlling Shareholder in connection with the collapse of
the dual-class share structure, in the form of the transfer of the
Assets upon the cancellation of its Class B Shares, is outside of
the range of the consideration paid for comparable transactions
relating to the collapse of a dual-class share structure. The
formal valuation of the Assets provides for a fair market value in
the range of US$585 million to $730 million, or approximately
US$1,610 to US$2,009 for each Class B Share held by the Stronach
Controlling Shareholder. Similarly, the dilution of the economic
interests of holders the Class A Subordinate Voting Shares, being
approximately 31%, is significant and is well outside the range for
comparable transactions. Other factors relating to substantive
fairness considered by the Board and the Special Committee include
the following: the reorganization proposal provides for the
resolution of the fundamental disagreement between the Stronach
Controlling Shareholder and the holders of a large proportion of
the Class A Subordinate Voting Shares regarding the business of
MID; the disposition of the racing and gaming business is
consistent with the objectives of a series of forbearance terms
which had been required by the independent directors of MID in its
consideration of various transactions and proposals, including
following the acquisition of the racing and gaming business in
2010; despite the 20% premium extended to the holders of the Class
B Shares (other than the Stronach Controlling Shareholder), the
dilution resulting from the purchase for cancellation of each
outstanding Class B Share not owned by the Stronach Controlling
Shareholder is not material; any historical advantage for MID's
relationship with its primary tenant, Magna International Inc.,
which may have been perceived as resulting from having Magna
International Inc. and MID under the common control of the Stronach
Trust is no longer applicable as the Stronach Trust no longer
controls Magna International Inc.; the small equity interest in MID
held by the Stronach Controlling Shareholder through its Class B
Shares provides for minimal incentive for the Stronach Controlling
Shareholder to seek or to support a change of control transaction;
the elimination of the Class B Shares would facilitate change of
control transactions, with all remaining shareholders receiving
their pro rata share of any control premium for the Common Shares;
all holders of Common Shares will have a vote in proportion to
their relative equity stake in MID; the elimination of the
dual-class share structure may potentially enhance liquidity for
the Class A Subordinate Voting Shares; and there exists no "sunset"
clause or other provision pursuant to which the dual-class share
structure would otherwise terminate as of a specified date. Factors
relating to procedural fairness considered by the Board and the
Special Committee include the following: the reorganization
proposal was negotiated on an arm's length basis between the
Initiating Shareholders, on the one hand, and the Stronach
Controlling Shareholder, on the other hand; the extensive review of
the reorganization proposal by the Special Committee with the
benefit of advice from independent financial and legal advisors;
the reorganization proposal must be approved by the requisite
levels of shareholder approval; the management information circular
will contain detailed disclosure regarding the reorganization
proposal; completion of the reorganization proposal will be subject
to a judicial determination as to its fairness; holders of Class B
Shares will have dissent rights; no substantive change is being
made to the terms of the Class A Subordinate Voting Shares; none of
the Special Committee, the Board or MID management participated in
the negotiation of the reorganization proposal made on December 22,
2010; MID is unable to effectively explore an alternative proposal
or arrangement for a change of control transaction or to eliminate
the dual class share structure of MID without the participation and
support of the Stronach Controlling Shareholder; and the Special
Committee did not seek or receive any fairness opinion in respect
of the reorganization proposal. The management information circular
to be mailed in connection with the reorganization proposal will
contain further details of the factors referred to above, other
considerations which the Board of Directors and Special Committee
of MID believe shareholders should take into account, a summary of
the advice received by the Special Committee, the background to the
reorganization proposal, the process followed by the Board of
Directors and the Special Committee in reviewing the reorganization
proposal, and the formal valuations of the Assets, the Class B
Shares and the Common Shares. Additional Information A copy of the
definitive agreements entered into today by MID in respect of the
reorganization proposal will be available at www.sedar.com. MID
cautions shareholders and others considering trading in securities
of MID that the reorganization proposal is subject to certain
material conditions, some of which are beyond MID's control,
including shareholder and court approval, and there can be no
assurance that the transaction contemplated by the reorganization
proposal, or any other transaction, will be completed. About MID
MID is a real estate operating company engaged primarily in the
acquisition, development, construction, leasing, management and
ownership of a predominantly industrial rental portfolio leased
primarily to Magna International Inc. and its automotive operating
units in North America and Europe. MID also acquires land that it
intends to develop for mixed-use and residential projects.
Additionally, MID owns Santa Anita Park, Golden Gate Fields,
Gulfstream Park (including an interest in The Village at Gulfstream
Park(TM), a joint venture with Forest City Enterprises, Inc.), an
interest in joint ventures in The Maryland Jockey Club with Penn
National Gaming, Inc., Portland Meadows, AmTote and XpressBet®, and
through some of these assets, is a supplier, via simulcasting, of
live horseracing content to the inter-track, off-track and account
wagering markets. For further information about MID, please visit
www.midevelopments.com or call 905-713-6322. MID's filings can be
found At www.sedar.com and www.sec.gov you can also find MID's
filings. Copies of financial data and other publicly filed
documents are available through the internet on Canadian Securities
Administrators' System for Electronic Document Analysis and
Retrieval (SEDAR) which can be accessed at www.sedar.com and on the
United States Securities and Exchange Commission's Electronic Data
Gathering, Analysis and Retrieval System (EDGAR) which can be
accessed at www.sec.gov. Notice to Investors This news release is
for informational purposes only and is not an offer to buy or the
solicitation of an offer to sell any securities. Forward Looking
Statements This press release contains statements that, to the
extent they are not recitations of historical fact, constitute
"forward-looking statements" within the meaning of applicable
securities legislation. Forward-looking statements include
statements regarding MID's future plans, goals, strategies,
intentions, beliefs, estimates, costs, objectives, economic
performance or expectations, or the assumptions underlying any of
the foregoing. Words such as "may", "would", "could", "will",
"likely", "expect", "anticipate", "believe", "intend", "plan",
"forecast", "project", "estimate" and similar expressions are used
to identify forward looking statements. Forward-looking statements
should not be read as guarantees of future events, 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. Undue reliance should not be placed on such statements.
Forward-looking statements are based on information available at
the time and/or management's good faith assumptions and analyses
made in light of our perception of historical trends, current
conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances, 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 events or results to differ materially from such
forward-looking statements. Important factors that could cause such
differences include, but are not limited to, the risks set forth in
the "Risk Factors" section in MID's Annual Information Form for
2009, filed on SEDAR at www.sedar.com and attached as Exhibit 1 to
MID's Annual Report on Form 40-F for the year ended December 31,
2009, which investors are strongly advised to review. The "Risk
Factors" section also contains information about the material
factors or assumptions underlying such forward-looking statements.
Forward-looking statements speak only as of the date the statements
were made and unless otherwise required by applicable securities
laws, MID expressly disclaims any intention and undertakes no
obligation to update or revise any forward-looking statements
contained in this press release to reflect subsequent information,
events or circumstances or otherwise. To view this news release in
HTML formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/January2011/31/c6712.html
pFor further information about this press release, please contact
Rocco Liscio, MID's Executive Vice-President and Chief Financial
Officer, at 905-726-7507/p
Copyright
MI Developments (NYSE:MIM)
Historical Stock Chart
From Jun 2024 to Jul 2024
MI Developments (NYSE:MIM)
Historical Stock Chart
From Jul 2023 to Jul 2024