Greenlight in Proxy Fight to Increase Value of MI Developments Stock
April 14 2005 - 5:47PM
PR Newswire (US)
Greenlight in Proxy Fight to Increase Value of MI Developments
Stock NEW YORK, April 14 /PRNewswire/ -- Greenlight Capital, Inc.,
("Greenlight") today announced that it has filed a proxy circular
with Canadian regulators to allow shareholders of MI Developments
Inc. (TSX: MIM.SV.A, MIM.MV.B; NYSE: MIM) to vote on Greenlight's
proposals to create value for all shareholders. David Einhorn,
President of Greenlight Capital, commented: "The board has an
obligation to serve the shareholders who own the company. Canadian
corporate law recognizes this principle. Our proposal is a
reasonable and rational way to unlock value for shareholders. We
urge shareholders to join us in making their views clear by voting
FOR the Greenlight resolutions using the GREEN proxy form."
Greenlight will also hold a conference call for MID shareholders on
Wednesday, April 20 at 2:00pm EDT (details are at the end of this
release). Greenlight also announced that the following letter is
being mailed to shareholders of MID: April 14, 2005 Dear Fellow MI
Developments Shareholder: We hold 9.9% of MID Class A stock and are
writing to present our proposals for value creation at MI
Developments Inc. ("MID") and to solicit your proxy. Greenlight
Capital, Inc. is a long-term investor seeking high absolute rates
of return while minimizing the risk of capital loss. As you may be
aware, Greenlight has been actively involved in protecting MID's
public shareholders' interests since MID announced its intention to
take MEC private in July 2004. Through the last year, we have
watched MID management and its Board of Directors continue to make
decisions detrimental to shareholders. This situation is untenable
and is destroying significant value, due to the private desires of
the controlling shareholder versus the interests of the economic
stakeholders. GREENLIGHT RESOLUTIONS WILL UNLOCK VALUE We have made
two proposals to MID that we believe will unlock significant value
for MID's shareholders. One is the "MEC Separation Resolution"
under which MID would sell or spin-off its investment in MEC. The
second is the "REIT Conversion Resolution" that proposes that MID
convert to an income-oriented investment vehicle such as a real
estate investment trust or REIT. We believe that if MID implemented
the Greenlight proposals, the shares would achieve substantially
better values, which we estimate to be in excess of US$40 per
share. A vote FOR the Greenlight proposals sends a clear message to
the Board that it cannot frustrate the reasonable expectations of
shareholders and under the current circumstances needs to stand up
to Mr. Stronach. SEPARATION OF MID AND MEC IS URGENT AND LONG
OVERDUE The principal reasons to support the MEC Separation
Resolution are: * It will restore MID's exclusive focus on stable
industrial and commercial properties that create a low risk, high
value-added steady cash flow investment. * MEC's money losing
racetrack and gaming business is at odds with MID's core real
estate business. * MEC will need substantial financing in the
future. MEC's poor financial performance is being subsidized by MID
at below market rates over shareholder objections. The Board is not
ready to stop throwing good money after bad. * The Board appears to
be more interested in maximizing the return on MID's existing
investment in MEC than in maximizing the value of MID as a whole. *
Separating MEC will improve MID's corporate debt rating, as Moody's
"sees MI Developments' investments in and with MEC as significantly
increasing risk versus the Company's standalone risk profile."
(report dated December 6, 2004) * Separating MEC from MID is good
for MEC's value because MEC's trading price, trading liquidity and
its ability to obtain strategic financing are negatively affected
by MID's control position. REIT CONVERSION PROVIDES IMMEDIATE
FINANCIAL BENEFITS MID's Directors are proposing a "do nothing"
approach instead of proceeding with a conversion plan and the
analysis justifying their position is misleading. MID will derive
significant monetary benefits from a REIT conversion. Such a
structure will also instil the fiscal discipline that MID lacks.
The principal reasons to support the REIT Conversion Resolution
are: * MID shareholders will achieve immediate tax-related benefits
through this structure. This benefit will be much larger than MID
claims and cannot be obtained simply by adding additional leverage
over time as MID proposes. Its analysis fails to account for the
incremental positive return from investing the proceeds provided by
such leverage. In fact, as MID increases its leverage, the tax
benefits of the REIT conversion increase. * An income-oriented
structure would normally be expected to have a much more generous
and shareholder-friendly dividend policy than MID management is
currently proposing. * MID's tax management tactics can at best
defer the tax burden of its domestic real estate operations. A REIT
structure would typically eliminate that burden in a permanent
fashion. * Many companies in Canada have adopted income-oriented
structures to achieve better marketplace valuations. There is
nothing radical about such a conversion. * MID has failed to
identify any serious drawback to the REIT conversion. BOARD REVIEW
PROCESS WAS FUNDAMENTALLY FLAWED Our proposals were considered by a
"Special Committee" of the MID Board of Directors whose members are
described by MID as "independent". We believe that the Special
Committee process leading to the MID Board's "do nothing"
recommendations has been flawed: * The Special Committee's history
has been to work closely with the management teams of MID and MEC
to support dubious transactions between the companies since 2004.
This pattern of conduct makes its independence questionable. * The
Special Committee met with MID management, MEC management and their
respective advisors, as it has historically done, but declined to
meet directly with us. As a result, they have distorted our
proposals. To claim that our proposals fail to take many factors
into consideration without vetting their concerns with us is
disingenuous. * Mr. Stronach's publicly avowed passion for MEC and
his ability to single handedly remove the "independent" directors
at will cannot be ignored by any MID Director. * MID has distorted
our proposals and used "scare tactics" in its recent presentations
to investors. We urge you to read our proxy circular which
addresses these inaccuracies. Mr. Stronach has declared publicly
that he will vote against our resolutions. His role in relation to
MID and MEC is unique in that he is a director and chairman of both
companies. His voting power of 76% is strikingly disproportionate
to his equity stake of under 1%. Mr. Stronach is, in effect, using
other people's money to fund his horseracing passion with little at
stake. Despite Mr. Stronach's preferences, shareholders with fewer
votes cannot be treated unfairly and Canadian corporate law
recognizes this principle. MID's Board of Directors cannot ignore
your views and ours simply because Mr. Stronach is prepared to use
his voting power to swamp ours. Regardless of Mr. Stronach's vote
at the Meeting, your vote will help convey a clear message to the
Board as to the MID investment in MEC and MID's optimal continuing
structure. There is a legal duty on the Board to balance the
interests of the controlling shareholder with the interest of
equity owners so as to produce a better corporation. We ask you to
read our circular carefully for a detailed explanation of our
thinking and are confident that you will conclude that voting FOR
the MEC Separation Resolution and FOR the REIT Conversion
Resolution is in MID's best interests. We ask that you sign, date
and return the enclosed GREEN form in accordance with the
instructions in the circular. You may do this even if you have
previously signed a form of proxy in support of management - the
more recent proxy automatically revokes the earlier one. We will
hold a conference call on Wednesday, April 20 at 2:00pm EDT to
further explain Greenlight's proposals, after shareholders have a
chance to review our circular. Please refer to our press release
for details on how to dial into the call. You may obtain an
electronic copy of our proxy circular from http://www.sedar.com/.
If you have questions or need assistance in voting your shares in
connection with your proxy, please call our proxy solicitor D.F.
King & Co., Inc. at 1-888-644-6071 and they will assist you.
Yours truly, Greenlight Capital, Inc. IMPORTANT 1. Be sure to vote
on the GREEN form. Vote "FOR" the two Greenlight Resolutions.
Remember, each properly executed proxy form you submit revokes all
prior votes. 2. If any of your shares are held in the name of a
bank, broker or other nominee, please contact the party responsible
for your account and direct him/her to vote on the GREEN form FOR
the two Greenlight Resolutions. REMEMBER, TO BE EFFECTIVE, PROXIES
MUST BE RECEIVED BY GREENLIGHT OR ITS AGENTS PRIOR TO 5:00 P.M. ON
MAY 2, 2005 IN ORDER TO ALLOW ENOUGH TIME TO DELIVER THEM TO THE
COMPANY OR ITS AGENTS. YOUR PROXY IS EXTREMELY IMPORTANT VOTE YOUR
GREEN PROXY TODAY Information on the Greenlight Conference Call:
When: Wednesday, April 20 at 2:00pm EDT Dial-in: 888-802-8577 (U.S.
& Canada) 973-935-2981 (International) Webcast:
http://calleci.econfcall.net/pub_cs_activelist.jsp Replay of the
conference call will be available through May 4, 2005 and can be
accessed by dialing 877-519-4471 (U.S. & Canada), 973-341-3080
(International), with the PIN number 5963749. DATASOURCE:
Greenlight Capital, Inc. CONTACT: Investor Contacts - Thomas Long
or Richard Grubaugh, both of D.F. King & Co., Inc.,
1-888-644-6071; Media - Ed Rowley or Patrick Linehan, both of The
Abernathy MacGregor Group, +1-212-371-5999, for Greenlight Capital,
Inc.
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