Magna International's proposal to end founder Frank Stronach's control of North America's largest auto-parts maker is being opposed by the Canada Pension Plan Investment Board, Toronto.
The board, which oversees C$133.7 billion (US$128.4 billion), said on Thursday it will vote against a May 6 agreement between Magna and the Stronach Trust that eliminates the dual-class share structure. The plan is scheduled for a shareholder vote at a June 28 meeting.
“We haven't often seen a proposal as egregious as this one,” David Denison, CEO of the investment board, said in an interview. The price shareholders would pay to eliminate Magna's dual-class share structure “is totally unreasonable and inappropriate.”
Magna's proposal is in response to criticism of its ownership structure that allowed Mr. Stronach, the company's chairman, to wield control over the company and its strategy. Through its ownership of Magna Class B shares, which are each equivalent to 500 Class A shares, the Stronach family controls more than two-thirds of the company's voting rights.
The proposal calls for the Stronach Trust to get 9 million new Class A shares, or a 7.4% stake, along with cash.
“We see this as a very negative precedent to have in the marketplace if it is allowed to go ahead,” Mr. Denison said. “It is a terrible precedent, in our mind.”
CPPIB owns 1.09 million Magna shares, or about 1% of the Class A shares, according to Bloomberg data.
A Magna spokeswoman, Tracy Fuerst, declined to comment.