MI Developments receives reorganization proposal with support from majority of Class A and Class B shareholders
March 31 2008 - 9:18AM
PR Newswire (US)
AURORA, ON, March 31 /PRNewswire-FirstCall/ -- MI Developments Inc.
(MID) (TSX: MIM.A, MIM.B; NYSE: MIM) today announced that its Board
of Directors has received a reorganization proposal on behalf of
various shareholders of MID, including entities affiliated with
Frank Stronach (the Stronach Group), MID's controlling shareholder.
The proposal has received indications of support from MID
shareholders owning more than 50% of the outstanding Class A
Subordinate Voting Shares and approximately 95% of the outstanding
Class B Shares. The stated objective of the reorganization is to
(a) effect a substantial cash distribution to MID shareholders and
(b) create a focussed real estate investment vehicle, which will
distribute 80% of its available cash flow, in which the interests
of all shareholders will be fully aligned. The principal components
of the reorganization proposal include: - Holders of MID Class A
Subordinate Voting Shares and MID Class B Shares would exchange
their existing MID shares for US$15.50 in cash and shares of a new
public company (New MID). - New MID would be owned approximately
80% by the former public shareholders, 10% by the Stronach Group
and 10% by Magna International Inc. - MID's multiple voting share
structure would be eliminated, with all of New MID's common shares
carrying one vote per share and being equal in all respects except
for Board nomination rights. - The New MID Board of Directors would
consist of nine members - five nominated by the Stronach Group and
Magna International and four nominated by the public shareholders.
Major decisions would require approval by more than two-thirds of
the New MID Board. - MID's controlling equity investment in Magna
Entertainment Corp. (MEC) would be sold to an entity to be
identified by the Stronach Group for US$25 million in cash. - MID
would transfer to a new limited partnership all of MID's loans to
MEC and its subsidiaries (comprised of a bridge loan and two
project financing facilities), US$150 million in cash (subject to
adjustment if the amount of these loans is more or less than US$247
million) and all of MID's development lands in Aurora, Ontario. The
Stronach Group would control the limited partnership through a 51%
ownership interest and as general partner would have exclusive
control and authority over all activities of the limited
partnership. Unless consented to by more than two-thirds of the New
MID Board, the limited partnership would be wound up after five
years. New MID public shareholders would hold special shares that
would provide them with a 49% interest in the limited partnership.
The Stronach Group would invest an additional US$25 million as part
of the proposed reorganization. - New MID would be prohibited from
entering into any future transactions with MEC or the limited
partnership without the unanimous consent of New MID's Board of
Directors. - New MID would alter its capital structure by
significantly increasing its credit facilities to US$1.1 billion.
Magna International would be asked to guarantee a US$1 billion
five-year term loan in exchange for a guarantee fee from New MID.
Magna International would pay an amount equal to the guarantee fee
for its 10% interest in New MID. UBS Securities LLC and Bank of
Montreal have provided a highly confident letter concerning the
term loan. - New MID would distribute at least 80% of its available
annual cash flow to its shareholders. - New MID and Magna
International would agree to negotiate a new leasing framework
which is intended to be mutually beneficial without changing the
current economics of MID's existing leases. For more details on the
reorganization proposal, please consult the proposal term sheet,
which will be posted on MID's website at
http://www.midevelopments.com/. Institutional holders of MID Class
A Subordinate Voting Shares holding an aggregate of over 50% of the
outstanding MID Class A Subordinate Voting Shares have expressed
support for the proposed reorganization. In addition, holders of
MID Class B Shares (including the Stronach Group) representing an
aggregate of approximately 95% of the class have agreed to support
the implementation of the proposal. John Simonetti, MID's Chief
Executive Officer, stated, "Over the last three years,
disagreements with certain of MID's shareholders have impacted our
relationship with Magna International and, as a result, impaired
our ability to grow our core real estate business. While we have
considered a number of possible solutions, they were ultimately not
pursued due primarily to a lack of consensus among the various
stakeholders. The reorganization proposal, which has expressions of
support from both the Stronach Group and a majority of our public
shareholders, appears to offer a new opportunity to re-establish a
strong working relationship with Magna International." The proposed
reorganization would be carried out by way of a court-approved plan
of arrangement under Ontario law and would be subject to applicable
shareholder and regulatory approvals, including the requirements of
Multilateral Instrument 61-101. The proposal contemplates MID
calling by May 30, 2008 a special meeting of shareholders to
consider the proposal and closing the transaction no later than
July 30, 2008. In addition, the proposed reorganization is
conditional on, among other things, Magna International's
participation in the proposed transaction and the provision of the
guarantee of the New MID term loan by Magna International, the
closing of the New MID loan facilities, the finalization of
definitive documentation and dissent rights not being exercised by
holders of more than 10% of the MID Class A Subordinate Voting
Shares. The Board of Directors of MID will review the
reorganization proposal and has established a Special Committee of
independent directors of MID comprised of Mr. Neil Davis, as
Chairman, and Messrs. John Barnett, Phil Fricke and Manfred
Jakszus. The Special Committee will consider the reorganization
proposal and make recommendations to the MID Board. Magna
International has not made any commitment to participate in the
reorganization proposal. MID has today advised Magna International
of the receipt of the proposal and has requested that the Magna
International Board of Directors review the proposal and advise MID
following its review as to its willingness to participate in the
proposal. There can be no assurance that Magna International will
agree to participate in the transaction or the terms on which it
might agree to participate. MID cautions shareholders and others
considering trading in securities of MID that it has only recently
received the reorganization proposal, and at this time no decisions
or recommendations with respect to the proposal have been made by
the MID Board. The proposal is subject to certain material
conditions, some of which are beyond MID's control, and there can
be no assurance that the transaction contemplated by the proposal,
or any other transaction, will be completed. About MID MID is a
real estate operating company focusing primarily on the ownership,
leasing, management, acquisition and development of a predominantly
industrial rental portfolio for Magna and its subsidiaries in North
America and Europe. MID also acquires land that it intends to
develop for mixed-use and residential projects. MID holds a
controlling interest in MEC, North America's number one owner and
operator of horse racetracks, based on revenue, and one of the
world's leading suppliers, via simulcasting, of live horse racing
content to the growing intertrack, off-track and account wagering
markets. Forward-Looking Statements This press release contains
"forward-looking statements" within the meaning of applicable
securities legislation. Forward-looking statements may include,
among others, statements relating to the reorganization proposal
and the terms and conditions of such proposal. 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 or results and will not necessarily be
accurate indications of whether or the times at or by which such
future events or results 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, and are subject to known and
unknown risks, uncertainties and other unpredictable factors, many
of which are beyond the Company'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 that: the parties will
not proceed with the proposed reorganization; if the parties decide
to proceed with a transaction, the terms of such transaction may
differ from those that are currently contemplated by the proposed
reorganization; if the parties decide to proceed with a
transaction, such transaction may not be successfully completed for
any reason (including the failure to obtain any required
approvals); and are set forth in the "Risk Factors" section in
MID's Annual Information Form for 2007, filed on SEDAR at
http://www.sedar.com/ and attached as Exhibit 1 to MID's Annual
Report on Form 40-F for the year ended December 31, 2007, 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. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of the securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful.
Securities of New MID have not been registered under the United
States Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent registration or an applicable
exemption from the registration requirements. DATASOURCE: MI
Developments Inc. CONTACT: John Simonetti, MID's Chief Executive
Officer, at (905) 726-7619
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