Magna International chairman Frank Stronach plans to restructure his racetrack and real estate holdings in a deal that involves the automotive parts company once again taking an ownership stake in the company that owns the land under most of its plants.
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Stronach will pay US$25m to purchase a 59% stake in Magna Entertainment from his real estate arm MI Developments. Those two companies were spun off from the auto parts operation in 2003 after years of shareholder complaints about the automotive company financing non-automotive operations.
The auto parts company and Stronach will each hold a 10% stake in a new real estate company that will be prohibited from having any links with the money-losing real estate and gambling unit but will continue to be a major landlord to Magna International.
Magna International will also guarantee a $1bn loan to the new real estate company.
That move has some shareholders of Magna International worried. They said the auto parts giant should use its $2.2bn cash hoard to snap up bargains during the slump in vehicle sales and production that is ravaging the US parts industry.
Stronach has been under pressure for more than two years from shareholders of MI Developments to cut that company’s ties with Magna Entertainment, which owns several racetracks in the United States, but has lost more than $500m since 2003.
