The Ontario Teachers’ Pension Plan will vote against Magna’s plan to sell a stake in itself to a Russian company because it is not in the best interest of shareholders.
“Russian Machines will control 50% of the director appointments while owning only 20% of the equity,” says a statement on the plan’s website. “This de facto change of control is proposed without any consideration being given to the Class A shareholders who represent the majority of the equity capital of the company.”
“Further, under the plan of arrangement, the Class A shareholders will have little, if any, input in the choice and election of directors.”
Teachers’ also says the proposal includes a substantial change in compensation for certain senior officers without the provision for a separate shareholder vote on this matter.
“The plan of arrangement contemplates the continuation of a high level of consulting fees that are not justified by the results of the company. This is disturbing because Magna’s share price has underperformed its peers over the past ten years, and it has also underperformed broader markets,” the statement says. “It is not clear that the consulting arrangement has created any value for Class A shareholders.”
For these reasons, Teachers’ plans to vote against the proposal at Magna’s meeting today. According to Bloomberg, the fund has a $41.3 million interest in Magna, based on Friday’s closing price.
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