09/15/2004 11:00PM

Magna stock proposal canceled


MI Developments has dropped a proposal to purchase all of the outstanding shares in the racetrack company Magna Entertainment Corp., the two companies said Thursday.

The board of MI Developments rejected the proposal on the advice of a committee that examined the deal and its senior management, MI Developments said in a statement. The proposal had come under fire from shareholder groups of both companies shortly after being announced earlier this summer.

MI Developments is already a 62 percent equity owner of Magna Entertainment. MI Developments' former chief executive officer, Brian Tobin - who resigned several weeks ago - had said the proposal would allow Magna Entertainment to raise cash more cheaply in order to pursue development projects.

Some shareholders of MI Developments who were critical of the deal said that Magna Entertainment would drag down the performance of MI Developments. Magna Entertainment shareholders countered that MI Developments' offer of $7 a share did not adequately reflect the value of Magna's properties should some of its racetracks get slot machines.

Stock in Magna Entertainment dropped 57 cents on Thursday, down 9.5 percent, to $5.44. Shares in MI Developments were up $1.92, or 8 percent, to $25.83.