Hotchkis and Wiley Capital asks MI Developments not to recommend Stronach's reorganization plan

By Lisa Kerner

Charlotte, N.C., May 16 - MI Developments Inc. shareholder Hotchkis and Wiley Capital Management, LLC once again asked the company to reconsider and not recommend its proposed reorganization "based on the egregious and unnecessary value transfer from existing shareholders" to chairman of the board Frank Stronach.

The investor, with an 11.7% stake in MI Developments, made its request in a May 14 letter to the company's special committee and included as part of a schedule 13D filing with the Securities and Exchange Commission.

Hotchkiss and Wiley said it believes if MI Developments were optimally run it would be worth $50.81 per share.

In April, Hotchkiss and Wiley said it will vote all its shares against the reorganization transaction, a prior SEC filing stated.

As previously reported, under Stronach's plan announced on March 31, holders of MI Developments' class A subordinate voting shares and class B shares would exchange their existing shares for $15.50 in cash and shares of a new public company.

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, a prior news release stated.

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. Its board of directors would consist of nine members: five nominated by the Stronach Group and Magna International and four nominated by the public shareholders, it was noted previously.

MI Developments reported that 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.

Hotchkiss and Wiley believes Stronach's deal reflects an "appalling and unjustified transfer of assets from shareholders" to Stronach, giving him more than $325 million of shareholder value on day one plus control of a partnership funded with another $220 million of shareholder assets that he can use to support his controlled entity, Magna Entertainment.

The investor also accused Stronach of overseeing the investment of "hundreds of millions" of MI Developments' dollars into Magna Entertainment, where Stronach is chairman and chief executive officer.

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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