Magna International Inc. (MGA), the Toronto, Ontario-based company that is considered a powerhouse in the auto-parts business, announced it will soon spin-off its investments in ancillary businesses to better focus on its core automotive business.
Affected will be North America’s largest owner of horse racetracks, Magna Entertainment Corp. (MECA) in which MGA holds a 59% ownership interest.
MGA’s president and CEO, Belinda Stronach, said the moves will "unlock unrealized value" in her company’s principal business. Stronach is the daughter of Frank Stronach, founder of both MGA and MECA and one of the world’s largest breeders and owners of thoroughbred horses.
According to Belinda Stronach, the company will first distribute the value of these assets directly into the hands of MGA shareholders. Then, it plans to separate racetrack and real estate holdings from the core business.
Wall Streeters have criticized the parent company by suggesting that these ancillary holdings, especially the horse tracks, were affecting the true value of MGA, a criticism that the new moves hopes to address. A company official has estimated that the moves could benefit the primary company shareholders by anywhere from 14% to 17%.
Following the moves, the 59% interest in Magna Entertainment Corp. will be held by MI Developments whose real estate holdings will place it fourth among Canada’s publicly-held commercial real estate companies.