Magna International and Donnelly Corporation have entered into a definitive merger agreement pursuant in which Donnelly will become a wholly-owned subsidiary of Magna.

The transaction is structured as a merger of a wholly-owned subsidiary of Magna into Donnelly in which Donnelly Class A and Class B shareholders will receive Magna Class A Subordinate Voting shares with a value of U.S. $28 per Donnelly share.

The purchase price represents total consideration of approximately $US320 million plus the assumption of approximately $95 million of interest-bearing debt.

Donnelly, based in Holland, Michigan, is the second largest global supplier of exterior and interior mirrors to the automotive industry, with 2001 sales of approximately $850 million, and has been a leader in the technological evolution of mirrors through the addition of electronic features.

Following closing of the transaction, Magna intends to combine its mirrors business with Donnelly, thereby creating the leading global mirrors supplier. The combined entity, which will operate under the business name of Magna Donnelly, will have annual sales of over $1.2 billion and will be led by Dwane Baumgardner, Donnelly's chairman and CEO.

Closing of the transaction, expected to be late September, is subject to receipt of antitrust and other regulatory approvals as well as approval of two-thirds of the votes cast at a shareholders meeting to be called by Donnelly to approve the transaction.

Magna has entered into an agreement with certain Class A and Class B shareholders of Donnelly representing approximately 72% of the total votes eligible to be cast at the shareholders meeting, pursuant to which those shareholders have agreed to vote their shares in favour of the transaction.

Donnelly shareholders will receive, for each share of Donnelly stock, a fraction of a share of Magna Class A Subordinate Voting stock valued at $28, so long as the average trading price on the New York Stock Exchange of Magna Class A Subordinate Voting shares for the 20 trading days ending on the second day before closing is between $61 and $80 per share.