Magna International's proposed buyout of founder Frank Stronach's controlling shares can go ahead, an Ontario appeals court ruled, according to local media reports.

The newspaper and other media said a three-judge panel of Ontario's Divisional Court upheld a lower-court decision approving the buyout, Reuters reported.

The deal won approval from shareholders in July and received Ontario Superior Court approval earlier this month.

But it was appealed by a dissident group of shareholders - including the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers' Pension Plan - who claimed the payoff to Stronach was unreasonable.

The CPPIB, one of Canada's largest pension fund managers, said it would now end its campaign against the deal, increasing the odds it will go through.

"We are disappointed with the outcome, but accept today's ruling by the Divisional Court of the Ontario Superior Court of Justice and will not appeal that decision," it said in an e-mailed statement.

"As an ongoing shareholder of Magna, we intend to engage with the company on its governance structure and practices under the revised ownership arrangement."

Reuters noted that Magna's Class A shares jumped over 20% in May after it announced the plan designed to release the iron grip Austrian immigrant Stronach has held on the company he founded in the late 1950s in a garage.

Under the deal, the company would pay the 77 year old entrepreneur US$300m in cash and 9m class A shares in order to give up his controlling class B shares.

The Class A shares closed at $75.13 in New York on Monday, valuing the stock portion alone at $676.2m.

Each class B share carries 300 votes, whereas each class A share carries one vote. That has allowed Stronach to control the company while owning just a small part of the equity.

The deal would also give Stronach control of a new electric car parts joint venture with Magna and four years of lucrative consulting fees.

In July, about three-quarters of Magna's subordinate shareholders approved the deal to collapse the dual-share structure.

But at least six institutional shareholders, including four major Canadian pension plans, opposed it, calling the payoff to Stronach "unreasonable" and "fundamentally unfair," and saying it set a bad precedent.

The proposal had also been challenged by staff at Ontario's provincial securities regulator, who alleged it was "contrary to the public interest and harmful to the integrity of the Ontario capital markets."

A three-person Ontario Securities Commission panel ruled in June that it was not convinced the proposed deal was abusive to shareholders.

Some shareholders have long complained about Stronach's control of the company, his "consulting fees," and his side projects, including the now bankrupt Magna Entertainment horse track and entertainment venture.

The day Magna announced the plan to pay off Stronach, several analysts raised their price targets for the company.

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