Magna Recommends Rejection of "Mini-Tender" Offer

Rhea-AI Summary

Magna International Inc. (TSX: MG; NYSE: MGA) has advised shareholders to reject an unsolicited mini-tender offer from TRC Capital Investment The offer is to purchase up to 2,000,000 Magna Common Shares (less than 1% of outstanding shares) at CDN $57.90 per share. Magna highlights that this price is 4.49% below the market price as of July 29, 2024, and the offer is highly conditional. Despite a current premium due to recent price drops, Magna emphasizes the offer's risks, including TRC Capital's ability to withdraw if share prices fall below CDN $57.58. Magna urges shareholders to exercise caution, obtain current market quotations, and consult with financial advisors before responding to the offer.

Positive

• Current offer price represents a 7.58% premium to the previous day's closing price

Negative

• Unsolicited mini-tender offer for less than 1% of outstanding shares
• Offer price is 4.49% below the market price as of July 29, 2024
• Highly conditional offer with potential for withdrawal
• Offer is not fully funded and conditioned upon financing

Insights

Financial Analyst

This mini-tender offer by TRC Capital is a strategic maneuver that warrants caution. The offer price of CDN $57.90 per share, while 7.58% above the recent closing price, comes with significant strings attached. The conditional nature of the offer, particularly the potential withdrawal if Magna's stock price falls below CDN $57.58, is a red flag. Given that Magna's stock closed at CDN $53.82 on August 8, this condition has already been triggered.

Investors should be wary of the lack of regulatory oversight typically associated with mini-tender offers. TRC Capital's track record of similar offers for other companies suggests a pattern of opportunistic behavior. The potential liquidity risk for shareholders who tender their shares, coupled with the offer's unclear financing, adds another layer of uncertainty. From a financial perspective, this offer appears more beneficial to TRC Capital than to Magna's shareholders, potentially allowing them to acquire shares at a discount without the usual premium associated with larger tender offers.

Legal Expert

The mini-tender offer by TRC Capital raises several legal and regulatory concerns. By targeting less than 5% of Magna's outstanding shares, TRC Capital circumvents many of the disclosure and procedural requirements mandated for formal take-over bids under Canadian and U.S. securities laws. This regulatory arbitrage potentially leaves shareholders with less protection and information than they would have in a traditional tender offer.

The cautionary statements from both the Canadian Securities Administrators and the U.S. Securities and Exchange Commission regarding mini-tender offers underscore the regulatory bodies' concerns about these practices. Magna's recommendation for shareholders to reject the offer and its request to include their press release with TRC Capital's offer materials demonstrates a proactive approach to shareholder protection. From a legal standpoint, while the offer itself may not be illegal, it operates in a grey area that regulators have repeatedly flagged as potentially misleading to investors.

AURORA, Ontario, Aug. 09, 2024 (GLOBE NEWSWIRE) -- Magna International Inc. (TSX: MG; NYSE: MGA) today reported that it has received notice of an unsolicited mini-tender offer made by TRC Capital Investment Corporation (“TRC Capital”) to purchase up to 2,000,000 Magna Common Shares, or less than 1% of Magna’s outstanding Common Shares, at a price of CDN $57.90 per share. Magna cautions shareholders that the mini-tender offer has been made at a price below recent market prices, representing a discount of 4.49% to the closing price of Magna’s Common Shares on the Toronto Stock Exchange (“TSX”) on July 29, 2024, the last trading day before the mini-tender offer commenced. Although the offering price represents a premium of 7.58% to yesterday’s closing price of Magna Common Shares on the TSX of CDN $53.82, the offer is highly conditional. TRC Capital’s offer states that it may withdraw its offer if, among other things, the market price of Magna Common Shares falls below CDN $57.58, for reference, the closing price on the TSX for Magna Common Shares on August 8, 2024, was CDN $53.82, which is already below this threshold; additionally, TRC Capital’s offer is not fully funded and is conditioned upon receipt of necessary financing on terms it deems reasonable in its sole discretion.

Magna does not endorse TRC Capital’s unsolicited mini-tender offer, is not affiliated or associated in any way with TRC Capital, and unequivocally recommends shareholders reject the TRC Capital offer.

TRC Capital has made many similar unsolicited mini-tender offers for shares of other public companies. Mini-tender offers typically seek to acquire less than 5% of a company’s outstanding shares, thereby avoiding many disclosure and procedural requirements applicable to formal take-over bids and tender offers under Canadian and United States securities legislation. Both the Canadian Securities Administrators (“CSA”) and the U.S. Securities and Exchange Commission (“SEC”) recommend that investors exercise caution with mini-tender offers and have expressed serious concerns about mini-tender offers, including the possibility that investors might tender to such offers without understanding the offer price relative to the current market price of their securities.

Comments from the CSA on mini-tenders can be found on the Ontario Securities Commission website at:
https://www.osc.ca/en/securities-law/instruments-rules-policies/6/61-301/csa-staff-notice-61-301-staff-guidance-practice-mini-tenders.

The SEC investor advisory regarding mini-tender offers can be found at:
http://www.sec.gov/investor/pubs/minitend.htm.

Magna urges shareholders to obtain current market quotations for their shares, consult with their broker or financial advisor and exercise caution with respect to TRC Capital’s offer. Magna recommends that shareholders who have not responded to TRC Capital’s mini-tender offer take no action. Shareholders who have already tendered their shares should seek to withdraw them. According to TRC Capital's offer documents, Magna shareholders who deposit their shares in acceptance of the offer may withdraw their shares at any time before August 30, 2024, by following the procedures described in TRC Capital’s offer documents.

Magna requests that a copy of this press release be included with all distributions of materials relating to TRC Capital’s mini-tender offer related to Magna Common Shares.

INVESTOR CONTACT
Louis Tonelli, Vice-President, Investor Relations
louis.tonelli@magna.com │ 905.726.7035

MEDIA CONTACT
Tracy Fuerst, Vice-President, Corporate Communications & PR
tracy.fuerst@magna.com │ 248.761.7004

OUR BUSINESS⁽¹⁾
Magna is more than one of the world’s largest suppliers in the automotive space. We are a mobility technology company built to innovate, with a global, entrepreneurial-minded team of over 179,000⁽²⁾ employees across 343 manufacturing operations and 105 product development, engineering and sales centres spanning 28 countries. With 65+ years of expertise, our ecosystem of interconnected products combined with our complete vehicle expertise uniquely positions us to advance mobility in an expanded transportation landscape. 

For further information about Magna (NYSE:MGA; TSX:MG), please visit www.magna.com or follow us on social. 

⁽¹⁾ Manufacturing operations, product development, engineering and sales centres include certain operations accounted for under the equity method.
⁽²⁾ Number of employees includes over 168,000 employees at our wholly owned or controlled entities and over 11,000 employees at certain operations accounted for under the equity method.

FAQ

What is the mini-tender offer price for Magna International (MGA) shares?

TRC Capital Investment is offering to purchase Magna International (MGA) shares at CDN $57.90 per share.

How many shares of Magna International (MGA) is TRC Capital seeking to purchase?

TRC Capital is seeking to purchase up to 2,000,000 Magna International (MGA) Common Shares, which represents less than 1% of Magna's outstanding Common Shares.

What is Magna International's (MGA) recommendation regarding the mini-tender offer?

Magna International (MGA) unequivocally recommends shareholders reject TRC Capital's unsolicited mini-tender offer and urges caution.

When is the deadline for Magna International (MGA) shareholders to withdraw tendered shares?

According to TRC Capital's offer documents, Magna International (MGA) shareholders who have tendered their shares can withdraw them at any time before August 30, 2024.