Magna International, Inc. (B)

Posted: 28 Feb 2012

See all articles by Timothy Luehrman

Timothy Luehrman

Harvard Business School - Finance Unit

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business

Date Written: November 5, 2010

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.

Suggested Citation

Luehrman, Timothy and Xuan, Yuhai, Magna International, Inc. (B) (November 5, 2010). Harvard Business School Finance Case No. 211-045, Available at SSRN: https://ssrn.com/abstract=2012697

Timothy Luehrman (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

Yuhai Xuan

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Drive
Irvine, CA California 92697-3125
United States

HOME PAGE: http://yuhai.merage.uci.edu/

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