Filed by MI Developments Inc.
Pursuant to Rule 425 under the Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14d-2 of the Securities Exchange Act of 1934, as amended.
Subject Company: Magna Entertainment Corp.
Commission File No. 000-30578
Dated: July 13, 2004
On July 13, 2004, MI Developments Inc. ("MID") issued the following press release:
For immediate release
MI DEVELOPMENTS ANNOUNCES OFFER TO TAKE MAGNA ENTERTAINMENT PRIVATE
July 13, 2004, Aurora, Ontario, Canada — MI Developments Inc. (TSX: MIM.A, MIM.B; NYSE: MIM) ("MID") today announced its intention to make an offer to acquire all the outstanding shares of Class A Subordinate Voting Stock of Magna Entertainment Corp. (TSX: MEC.A; NASDAQ: MECA) ("MEC") not currently owned by MID for consideration of US$1.05 in cash and 0.2258 of an MID Class A Subordinate Voting Share per share of MEC Class A stock. If the offer is completed, MID intends to acquire any shares of MEC Class A stock not tendered in the offer through a merger of MEC with a wholly-owned subsidiary of MID in which MEC shareholders would receive the same consideration per share of MEC Class A stock.
The consideration represents an offer price of US$7 per share of MEC Class A stock based upon the closing price of US$26.35 for the MID Class A shares on the NYSE on July 12, 2004. This offer price represents a premium of 21.5% over MEC's closing market price on NASDAQ yesterday and a 30.4% premium over MEC's average closing market price on NASDAQ for the previous 30 trading days.
Brian Tobin, Chief Executive Officer of MID stated: "We believe this offer represents an attractive opportunity for MEC shareholders. Not only does our offer provide MEC shareholders with a substantial premium to current trading prices, it also allows MEC shareholders, through ownership of MID shares, to participate in the future growth of MID and to continue to participate in the future growth of MEC."
MID currently owns all the shares of MEC Class B stock and approximately 16.5% of the outstanding MEC Class A stock, representing in the aggregate 96.6% of the votes attached to MEC's outstanding securities and a 62% equity interest in MEC. The number of shares of MEC Class A stock not owned by MID is approximately 40.8 million. If all MEC shareholders tender into the offer, MID estimates that it will pay approximately US$42.9 million in cash in the aggregate and will issue approximately 9.2 million Class A shares, resulting in a transaction value based upon yesterday's MID closing market price of approximately US$285.8 million.
"We indicated in recent months that MID was exploring ways in which it could grow and diversify its real estate portfolio," Mr. Tobin continued. "We believe that the development of MEC's underutilized lands and certain of its racing assets into destination retail/entertainment centers represents an attractive investment opportunity for MID. We believe that these developments and other opportunities for growth in MEC, including slot/video lottery terminal opportunities and improved racing operations, can best be realized with MID's direct assistance and participation. Taking MEC private will improve MEC's ability to execute its strategy by improving its ability to obtain financing."
The making of the offer was approved by a Special Committee of independent directors of MID comprised of Messrs. Barry Byrd, who acted as Chairman, Philip Fricke and Manfred Jakszus. The offer will constitute an "insider bid" for Canadian securities law purposes, and MID will be required to include in its offering materials an independent formal valuation of MEC prepared under the supervision of an independent committee of the MEC Board of Directors.
MID will mail the offering materials containing information concerning the transaction, MID and MEC promptly after its receipt of the formal valuation of MEC, expected in a few weeks. In addition to customary conditions, including receipt of certain regulatory approvals, the offer will be conditioned on the tender of:
No offer will be made for MEC's outstanding 7.25% convertible notes due 2009 or its 8.55% convertible notes due 2010. Following completion of the proposed privatization, the convertible notes will be convertible into MID Class A shares and a cash payment as contemplated by the note indentures at a conversion price based on the merger consideration. MEC options will become exercisable for MID Class A shares based on the merger consideration.
MID also announced that it has purchased today from Fair Enterprise Limited, a company controlled by Frank Stronach (the Chairman of MID and MEC and a trustee of the controlling shareholder of MID) and by members of the Stronach family, 3,682,515 shares of MEC Class A stock (approximately 7.5% of the outstanding MEC Class A stock) for US$0.89 and approximately 0.1922 of an MID Class A share per share of MEC Class A stock representing a price of US$5.96 per share. The price was based on the weighted average market price of the MEC Class A stock on NASDAQ for the five trading days ending on July 12, 2004 and on the weighted average market price of the MID Class A shares on the NYSE for the five trading days ending on July 12, 2004, meaning that no premium was paid by MID to Fair Enterprise for the acquisition of MEC shares. The issuance of MID Class A shares to Fair Enterprise is subject to regulatory approval.
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Mr. Stronach said: "I believe the offer and merger are in the best long-term interests of both MEC and MID shareholders and I strongly support this transaction. Fair Enterprise sold its MEC shares to MID at market prices so that shareholders would know that I will participate in this transaction solely through my investment in MID, and I will not benefit by tendering MEC shares into the offer."
About MID and MEC
MID is a real estate operating company engaged in the ownership, development, management, leasing and acquisition of industrial and commercial real estate properties located in North America and Europe. Virtually all its income-producing properties are under lease to Magna International Inc. and its subsidiaries. MID also holds a controlling investment in MEC, North America's number one owner and operator of horse racetracks, based on revenues, and one of the world's leading suppliers, via simulcasting, of live racing content to the growing inter-track, off-track and account wagering markets.
Analyst Presentation
We will hold a conference call for interested analysts and shareholders to discuss the transaction on Tuesday, July 13, 2004 at 8:30 a.m. New York/Toronto time. The number for North American callers is 1-800-796-7558. The number for overseas callers is 416-640-4127. Please call 10 minutes prior to the start of the conference call. MID will also webcast the conference call at www.midevelopments.com. The conference call will be chaired by Brian Tobin, Chief Executive Officer, and John Simonetti, Vice-President and Chief Financial Officer. For anyone unable to listen to the scheduled call, the rebroadcast numbers will be: 1-877-289-8525 (North America) and 416-640-1917 (overseas). The reservation number is 21056897 # and the rebroadcast will be available until Tuesday, July 20, 2004.
Media Call
We will also hold a media call for media representatives to discuss the transaction on Tuesday, July 13, 2004 at 10:30 a.m. New York/Toronto time. The number for North American callers is1-800-814-3911. The number for overseas callers is 416-640-4127. Please call 10 minutes prior to the start of the media call. The media call will be chaired by Brian Tobin, Chief Executive Officer, and John Simonetti, Vice-President and Chief Financial Officer. For anyone unable to listen to the scheduled call, the rebroadcast numbers will be: 1-877-289-8525 (North America) and 416-640-1917 (overseas). The reservation number is 21056901 # and the rebroadcast will be available until Tuesday, July 20, 2004.
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For further information about this media release, please contact John Simonetti at (905) 726-7619. For teleconferencing questions, please call Susan Fitzgerald at (905) 726-7106.
Forward-Looking Statements
The contents of this press release may contain "forward-looking statements" within the meaning of Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements may include, among others, statements regarding MID's future plans, costs, objectives or economic performance, or the assumptions underlying any of the foregoing. In this press release we use words such as "may", "would", "could", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", "forecast", "project", "estimate" and similar words to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or the times at or by which such future performance will be achieved. Forward-looking statements are based on information available at the time and/or management's good faith belief with respect to future events and are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond MID's control. MID expressly disclaims any intention and undertakes no obligation to update or revise any forward-looking statements to reflect subsequent information, events or circumstances or otherwise.
Where to Find Additional Information About the Transaction
This press release is neither an offer to purchase securities nor a solicitation of an offer to sell securities of MEC. At the time the expected offer is commenced, MID will file an offer to purchase/prospectus with the United States Securities and Exchange Commission and Canadian securities regulatory authorities and MEC will file a solicitation/recommendation statement with respect to the offer. Investors and stockholders are strongly advised to read the offer to purchase/prospectus (including the offer to purchase, letter of transmittal and related tender documents) and the related solicitation/recommendation statement when they become available because they will contain important information. At that time, investors and stockholders may obtain a free copy of the offer to purchase/prospectus, the related letter of transmittal and certain other offer documents, as well as the solicitation/recommendation statement from the Securities and Exchange Commission's website at www.sec.gov or at www.sedar.com. Free copies of these documents can also be obtained from MID by directing a request to MID, Attention: General Counsel, 455 Magna Drive, Aurora, Ontario, Canada L4G 7A9, (905) 713-6322. YOU SHOULD READ THE OFFER TO PURCHASE/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION CONCERNING THE OFFER.
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On July 12, 2004, MID sent the following letter to the Board of Directors of Magna Entertainment Corp:
Board of Directors
Magna Entertainment Corp.
337 Magna Drive
Aurora, Ontario L4G 7K1
| Attention: | Mr. Jim McAlpine President and Chief Executive Officer and Director |
Gentlemen:
As you know, we currently own all the shares of Magna Entertainment Corp.'s outstanding Class B Stock and approximately 16.5% of MEC's outstanding shares of Class A Subordinate Voting Stock, representing in the aggregate 96.6% of the votes attached to MEC's outstanding securities and a 62.0% equity interest in MEC. As your largest shareholder, we have for some time been considering the best way for us to participate with MEC in developing its real estate, racing operations and other assets.
It has become clear to us that the best interests of our respective shareholders will be served by our acquisition of the shares of MEC that we do not already own. We believe that the development of MEC's underutilized lands and certain of its racing assets and other opportunities for growth (including slot/video lottery terminal opportunities and improved racing operations) can best be realized with MID's direct assistance and participation. In addition, we believe that taking MEC private will improve MEC's ability to execute its strategy by improving MEC's ability to obtain financing.
Accordingly, our Board of Directors has authorized us to make an offer pursuant to which MEC stockholders would receive US$1.05 and 0.2258 of an MID Class A Subordinate Voting Share per share of MEC Class A Subordinate Voting Stock. If the offer is completed, we intend to acquire any shares of MEC Class A stock not tendered in the offer through a merger of MEC with a wholly owned subsidiary of MID in which your shareholders (other than those who exercise their appraisal rights) would receive the same consideration per share of MEC Class A stock. The offer will be conditioned upon, among other things, the tender of (i) at least a majority of the shares of MEC Class A stock not held by MID or related parties of MID and (ii) a number of shares of MEC Class A stock such that MID would hold at least 90% of the total number of the then outstanding shares of MEC Class A stock (after taking into account the conversion of up to all the shares of MEC Class B stock held directly or indirectly by MID into shares of MEC Class A stock). We enclose a copy of the press release we are issuing prior to the open of business tomorrow in connection with the offer.
Our proposal presents an attractive opportunity for MEC and its shareholders. Our offer represents a price of US$7.00 per share of MEC Class A stock, based upon the closing price of US$26.35 for the MID Class A shares on the NYSE on July 12, 2004. This price represents a premium of 21.5% over today's closing market price of the MEC Class A stock on NASDAQ and a 30.4% premium over the average closing market price of MEC Class A stock for the previous 30 trading days on NASDAQ.
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Our offer is being made directly to MEC shareholders. We believe that it will be favourably received by them due to the substantial premium to MEC's market price, the attractiveness of MID Class A shares and the advantages of the acquisition described above. MEC stockholders, through their ownership of MID Class A shares, will participate in MID's business, while continuing to participate in MEC's business. We are not seeking, and because the offer will be made directly to MEC's stockholders, Delaware law does not require, approval of the offer from MEC's Board of Directors.
Because our offer will constitute an "insider bid" for purposes of Canadian securities regulations, MID will be required to include in its offering materials an independent formal valuation of MEC prepared under the supervision of an independent committee of MEC's Board of Directors. We hereby request that you furnish us with such required valuation. We will bear the costs of the valuation. We also request that information that is made available to your financial advisors and to the valuator be shared, on a confidential basis, with us and our advisors. We intend to file our offering materials with the Securities and Exchange Commission and Canadian securities regulatory authorities and commence our offer promptly upon receipt of the required valuation, which we hope will be completed in a timely manner. We and our advisors are prepared to meet immediately with you and your advisors to assist you and your independent valuators in considering our proposal. Please advise us of the manner in which you and your board of directors would like to proceed.
We look forward to working with you to conclude this transaction successfully and to increase value for our respective shareholders.
| Very truly yours, | ||
| Brian V. Tobin Chief Executive Officer |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The contents of this letter may contain "forward-looking statements" within the meaning of Section 27A of the United States Securities Act of 1933, and Section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements may include, among others, statements regarding MID's future plans, costs objectives or economic performance, or the assumptions underlying any of the foregoing. In this letter we use words such as "may", "would", "could", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", "forecast", "project", "estimate" and similar words to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or the times at or by which such future performance will be achieved. Forward-looking statements are based on information available at the time and/or management's good faith belief with respect to future events and are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond MID's control. MID expressly disclaims any intention and undertakes no obligation to update or revise any forward-looking statements to reflect subsequent information, events or circumstances or otherwise.
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WHERE TO FIND ADDITIONAL INFORMATION ABOUT THE TRANSACTION
This letter is neither an offer to purchase securities nor a solicitation of an offer to sell securities of Magna Entertainment Corp. At the time the expected offer is commenced, MID will file an offer to purchase/prospectus with the United States Securities and Exchange Commission and Canadian securities regulatory authorities and Magna Entertainment Corp. will file a solicitation/recommendation statement with respect to the offer. Investors and stockholders are strongly advised to read the offer to purchase/prospectus (including the offer to purchase, letter of transmittal and related tender documents) and the related solicitation/recommendation statement when they become available because they will contain important information. Investors and stockholders may obtain a free copy of the offer to purchase/prospectus, the related letter of transmittal and certain other offer documents, as well as the solicitation/recommendation statement, from the Securities and Exchange Commission's website at www.sec.gov or www.sedar.com. Free copies of these documents can also be obtained from MID by directing a request to MID, Attention: General Counsel, 455 Magna Drive, Aurora, Ontario, Canada L4G 7A9, (905) 713-6322. YOU SHOULD READ THE OFFER TO PURCHASE/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION CONCERNING THE OFFER.
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