Magna International, Inc. (A)

Abstract

Magna International, Inc., a Canadian-based automotive parts manufacturer, is considering whether and how to unwind its dual-class ownership structure. A family trust controlled by the founder owns a 0.65% economic interest in the company but has 66% of the votes via a super-voting class of shares. Officers of the company are considering how to fashion a transaction that will end the family's control and win the approval of both classes of shareholders. The Magna (A) case asks the students to weigh the costs and benefits of dual-class ownership and the best way to convert to single-class. The Magna (B) case describes the proposal that Magna's board put to a shareholder vote. Students are asked to evaluate it and decide whether they would approve it.

Learning Objective: The Magna (A) and (B) cases are intended to support a general discussion of the costs and benefits of dual-class ownership structures, which are common in many countries. In the specific case of Magna, students are asked to quantify the potential benefits of unwinding a dual-class structure that has been in place for more than 30 years, and to consider how the value created should be divided between two classes of shareholders.