02/25/2011 2:32PM

MID shareholders to vote on Stronach plan next month

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Frank Stronach will step down as chief executive officer and chairman of MI Developments if shareholders approve a plan on March 29 that would allow Stronach to swap his supervoting shares in the company for its racing and gambling assets, according to a circular MI Developments made available to shareholders.

According to the circular, William Lenehan, a former managing director of the investment group Farallon Capital Management – one of MI Developments’s largest minority shareholders – has offered to serve as chief executive officer if the plan is approved. Separately, G. Wesley Voorheis, a Toronto lawyer who has represented minority shareholders during the development of the swap proposal, has offered to serve as chairman.

Combined with the swap of the racing assets, approval of the plan would remove Stronach from any positions of control over MI Developments or its remaining holdings. Stronach offered to swap the shares for the racing assets late last year, and a special committee convened by MI Developments has recommended that shareholders approve it.

Under the plan, Stronach would forfeit the shares – which carry 57 percent of the voting rights in the company but represent only 1 percent of the equity – in exchange for Santa Anita Park, Gulfstream Park and its casino, Golden Gate Fields, the company’s 51 percent stakes in Laurel Park and Pimlico Race Course, and other assets. Stronach would also pay MI Developments $20 million.

The special committee valued the racing assets between $585 million and $730 million. However, the assets have been a drag on MI Developments’s fairly consistent earnings, which are derived from leases on properties owned by Magna International, an auto-parts company founded by Stronach.

According to the circular, MI Developments would retain 106 properties valued at $1.2 billion if the swap is approved.

Stronach was paid $200,000 as chairman and chief executive of MI Developments in 2010. However, the board also authorized a $2 million bonus to Stronach at a Jan. 31 meeting this year “on the basis of his extensive services rendered to and on behalf of the company over the past several years,” according to the circular.