Dissident investors will have a tough time mustering enough strength on Tuesday to stop Magna International founder Frank Stronach from relinquishing most of his control of the auto-parts giant to a Russian billionaire.
Shareholders in North America's largest car-parts company are meeting to decide whether to approve Stronach's US$1.54-billion deal with Oleg Deripaska, an industrialist with close ties to Russian President Vladimir Putin.
The Ontario Teachers' Pension Plan, the third largest pension fund in Canada, argues the deal is bad for class A shareholders because it effectively shifts control to the Russian tycoon without any benefit to them.
However, the fund owns only a fraction of Magna's shares, making it unlikely it could stop the proposed deal without significant support.
"Obviously, we hope other shareholders will see it the way we see it and we think there's a number of large institutions that see it like that," Teachers Plan CEO Claude Lamoureux said in an interview on Monday.
"Every large institutional investor and even sophisticated individuals that own shares in Magna ... will probably have the same reaction that we have."
Under the proposal, Deripaska would get the power to nominate six members of a 14-member board of directors in a new company that would control Magna, based in Aurora, Ontario.
A Stronach family trust would nominate another six directors, while the company's top executives would occupy the final two seats.
The new company would have 69 percent voting control of Magna, but hold 16 percent of its equity.
The pension plan argues the Magna proposal "represents a de facto change of control" of the company while paying a "high level of consulting fees" that are not justified by company's performance.
"It's a bit egregious," Lamoureux said. "It's not to the advantage of the shareholders. The whole process here is totally flawed."
Lamoureux said he had no direct indication that there was a groundswell of support for his position but one observer said other shareholders may also not like what they see.
"I suspect there's opposition to it," Bill Mackenzie, director of special projects with the Canadian Coalition for Good Governance, said on Monday.
"It's an interesting deal (but) it's unfortunately complex and again, the minority shareholders just get to stand along and watch from the sidelines as deals go down."
"There are certainly issues would stumble a few investors as far as this deal goes: primarily the voting rights, shifting control (and) no say," said Mackenzie.
"You've still got a disenfranchised group that owns a majority of the equity."
Stronach, who built Magna from scratch and whose family has always maintained strong control of the public company, has argued the deal with Russian Machines, owned by Deripaska's Moscow-based Basic Element, will open doors to the burgeoning Russian car market.
"Maybe it will be a good business deal but from the ownership side, it cuts out the big contributors of equity," Mackenzie said.
Deripaska is said to be one of the richest people in Russia. However, the United States has stripped him of his entry visa.