Greenlight Capital asks MI Developments' board to protect shareholders' interests

By Lisa Kerner

Charlotte, N.C., Aug. 26 - MI Developments Inc. shareholder Greenlight Capital expressed concern about the company's investment in Magna Entertainment Group and asked the board to protect the interests of its minority shareholders.

In an Aug. 25 letter to the board, Greenlight said the board must take necessary steps "to enforce or preserve" the value of MI Developments' $267 million senior debt investment in Magna Entertainment.

The board was urged not to compound the risk to the company by continuing to fund Magna Entertainment or by extending the maturity of existing debt, the letter stated.

Greenlight's letter was included in a schedule 13D filed with the Securities and Exchange Commission.

According to the investor, Magna Entertainment has "utterly failed as a business enterprise."

"More money, time and resources will not resuscitate it under Mr. Stronach's leadership or anyone else he appoints to pursue his so-called vision," the letter stated. Frank Stronach is MI Developments' controlling shareholder.

Greenlight added that "after many years of failure, Magna Entertainment still has no viable business plan."

Shareholders have been threatened that if they don't capitulate to Stronach's demands, MI Developments will continue to fail to take any action to create shareholder value, Greenlight said.

"Undoubtedly this is why a majority of them were intimidated enough to support a reorganization proposal that otherwise made no sense," Greenlight stated in the letter.

Greenlight suggested possible options the board could take that would not require Stronach's personal support, including foreclosing on the senior debt or marketing its Magna Entertainment debt position for sale to a third party.

In July it was reported that the Ontario Divisional Court dismissed Greenlight's appeal of a decision by the Ontario Superior Court in Greenlight's suit against MI Developments and some of its current and former officers and directors.

Greenlight was ordered to pay costs of approximately $2.1 million.

MI Developments postponed its special meeting scheduled for July 24 where shareholders were to vote on a reorganization proposal submitted by Stronach and his affiliates, a prior news release said.

Stronach's proposal calls for holders of MI Developments' class A subordinate voting shares and class B shares to exchange each of their existing shares for $15.50 in cash and shares of a new public company, the company said.

MI Developments would sell its controlling equity investment in Magna Entertainment Corp. to an entity to be identified by the Stronach Group for $25 million in cash.

The new MI Developments would be owned 80% by the former public shareholders, 10% by an entity affiliated with Stronach and 10% by Magna International Inc., according to MI Developments.

MI Developments is an Aurora, Ont.-based real estate operating company engaged in the ownership, development, management, leasing and acquisition of industrial and commercial real estate properties located in North America and Europe.

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