The Stronach family, founders and controlling shareholders of Cananda-based Magna International, could relinquish more than 40 years of control today when shareholders vote on whether to eliminate the company's dual share structure.
The Stronachs control two-thirds of the automotive supplier's voting shares but own less than 1% of its equity.
If the proposal were to be voted through at the special meeting of shareholders in Toronto, the Stronach family trust would receive $863 million, including $300 million in cash and nine million new single-vote shares, in exchange for diluting its control of the vote.
The company, in common with many other family-controlled firms, operates a dual share structure where one class of share (normally termed "class B") is worth more than the other ("class A") as it carries enhanced voting rights that enables the founders to maintain control.
Reports in the Canadian media say that while many of the shareholders agree with the principle of the one share, one vote system, they do not agree with the terms of the deal.
They particularly don't like the fact that under the deal the Stronachs would receive 17 times the value of an ordinary share for each of their class B shares. The stake of existing single-vote shareholders would also be much more heavily diluted, say insiders.
The proposal has faced other problems since the company announced its intentions earlier this year. In June, the Ontario Securities Commission announced that it was to convene a hearing to determine whether it is in the public interest to prevent the proposed transaction.
The OSC is also insisting on greater disclosure from Magna.
The family has yet to make a statement on the matter, but are believed to be resistant to the OSC demands.
The company's 77-year old patriach Frank Stronach founded Magna in 1969 when he merged his Multimatic Investments company with Magna Electronics Corp. He remains chairman of the board. In 1971 he introduced his management philosophy, Fair Enterprise, which makes every employee a shareholder in Magna.
His daughter Belinda Stronach is executive vice chairman.
Dual class shares: aristocracy or meritocracy?
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