0001164833-08-000102.txt : 20080417
<SEC-HEADER>0001164833-08-000102.hdr.sgml : 20080417
<ACCEPTANCE-DATETIME>20080417161423
ACCESSION NUMBER: 0001164833-08-000102
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20080417
DATE AS OF CHANGE: 20080417
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: MI DEVELOPMENTS INC
CENTRAL INDEX KEY: 0001252509
STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500]
IRS NUMBER: 000000000
STATE OF INCORPORATION: A6
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-79210
FILM NUMBER: 08762298
BUSINESS ADDRESS:
STREET 1: 455 MAGNA DR
STREET 2: AURORA ONTARIO
CITY: CANADA
STATE: A6
ZIP: L4G7A9
BUSINESS PHONE: 9057136322
MAIL ADDRESS:
STREET 1: 455 MAGNA DR
STREET 2: AURORA ONTARIO
CITY: CANADA
STATE: A6
ZIP: L4G7A9
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: HOTCHKIS & WILEY CAPITAL MANAGEMENT LLC
CENTRAL INDEX KEY: 0001164833
IRS NUMBER: 954871957
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 725 SOUTH FIGUERORA ST 39TH FLOOR
CITY: LOS ANGELES
STATE: CA
ZIP: 90017
BUSINESS PHONE: 2134301000
MAIL ADDRESS:
STREET 1: 725 SOUTH FIGUEROA ST 39TH FLOOR
CITY: LOS ANGELES
STATE: CA
ZIP: 90017
</SEC-HEADER>
<DOCUMENT>
<TYPE>SC 13D
<SEQUENCE>1
<FILENAME>mim13d00.txt
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
MI Developments Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Class A Subordinate Voting Shares
- --------------------------------------------------------------------------------
(Title of Class of Securities)
55304X104
- --------------------------------------------------------------------------------
(CUSIP Number)
Anna Marie Lopez
Hotchkis and Wiley Capital Management, LLC
725 South Figueroa Street, 39th floor
Los Angeles, California 90017-5439
(213) 430-1896
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 17, 2008
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 13d-1(f) or 240.13d-1(g), check the
following box [X].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
<PAGE>
13D
===================
CUSIP No. 55304X104
===================
- ------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Hotchkis and Wiley Capital Management, LLC 95-4871957
- ------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
2
- ------------====================================================================
3 SEC USE ONLY
- ------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
OO
- ------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
- ------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------====================================================================
SOLE VOTING POWER
7
NUMBER OF 4,319,900
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY -0-
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING 5,314,800
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
-0-
- ------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
5,314,840 shares (Ownership disclaimed pursuant to Section 13d-4
of the 1934 Act)
- ------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions) [ ]
- ------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
11.5%
- ------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
IA
- ------------====================================================================
<PAGE>
13D
===================
CUSIP No. 55304X104
===================
- ------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Hotchkis and Wiley Mid-Cap Value Fund 95-4607961
- ------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
2
- ------------====================================================================
3 SEC USE ONLY
- ------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
OO
- ------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
- ------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------====================================================================
SOLE VOTING POWER
7
NUMBER OF 2,533,400
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY -0-
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,533,400
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
-0-
- ------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,533,400 shares
- ------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions) [ ]
- ------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.5%
- ------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
IV
- ------------====================================================================
<PAGE>
Item 1. Security And Issuer
- ------ -------------------
This statement on Schedule 13D relates to Class A Subordinate Voting
Shares (the "Class A Shares") of MI Developments Inc. (the "Company"). The
Company's principal offices are located at 455 Magna Drive, Aurora, Ontario,
Canada L4G 7A9.
Item 2. Identity And Background
- ------ -----------------------
Preliminary Note: This statement is filed on behalf of Hotchkis and Wiley
Capital Management, LLC ("HWCM") and Hotchkis and Wiley Mid-Cap Value Fund ("HW
Fund"). HWCM and HW Fund are collectively referred to as "Reporting Persons".
(a) HWCM
(i) State or other place of its organization: Delaware
(ii) Principal business: registered investment advisor
(iii) Address of its principal office:
725 South Figueroa Street, 39th Floor
Los Angeles, CA 90017-5439
(iv) Criminal Conviction: HWCM has not been convicted in a criminal
proceeding during the last five years.
(v) Court or Administrative Proceedings: HWCM has not been a party to
a civil proceeding or judicial body, or subject to a judgment or
a decree enjoining future violations.
(b) HW Fund
(i) State or other place of its organization: Delaware
(ii) Principal business: investment company
(iii) Address of its principal office:
725 South Figueroa Street, 39th Floor
Los Angeles, CA 90017-5439
(iv) Criminal Conviction: The Fund has not been convicted in a
criminal proceeding during the last five years.
(v) Court or Administrative Proceedings: The Fund has not been a
party to a civil proceeding or judicial body, or subject to a
judgment or a decree enjoining future violations.
Item 3. Source And Amount Of Funds And Other Consideration
- ------- --------------------------------------------------
(a) HWCM*
HWCM purchased the Class A Shares on behalf of its clients in the ordinary
course of business, using the investment capital of its clients. The Class A
Shares were acquired at an average price of approximately $26.34 per share
(including commissions). The amount of investment capital used to purchase
the Class A Shares was approximately $140,018,376 (including commissions).
*Note that the average share price and amount of investment capital used to
purchase the Class A Shares includes those Class A Shares reported below by
HW Fund.
(b) HW Fund
HW Fund purchased the Class A Shares in the ordinary course of business, using
its investment capital. The Class A Shares were acquired at an average price of
approximately $27.82 per share (including commissions). The amount of
investment capital used to purchase the Class A Shares was approximately
$70,466,823 (including commissions).
Item 4. Purpose Of The Transaction
- ------ --------------------------
The purpose of the acquisition of the Class A Shares was and is for investment,
and the acquisitions of the Class A Shares by each of the clients of HWCM were
made in the ordinary course of business and were not made for the purpose of
acquiring control of the Company. As stated below in paragraph 3 of this
Item 4, HWCM may now be deemed to be seeking to influence the Company's policies
Although no Reporting Person has any specific plan or proposal to acquire or
dispose of Class A Shares, consistent with its investment purpose, each
Reporting Person may, at any time acquire additional Class A Shares or dispose
of any or all of its Class A Shares depending upon an ongoing evaluation of the
investment in the Class A Shares, prevailing market conditions, other investment
opportunities, liquidity requirements of the Reporting Person and/or other
investment considerations. No Reporting Person has made a determination
regarding a maximum or minimum number of Class A Shares which it may hold at any
point in time.
Also, consistent with their investment intent, the Reporting Persons have
communicated and intend as appropriate in the future to communicate their
opinion and make recommendations to the Special Committee of independent
directors of MI Developments (NYSE: MIM) (referred to as "MID")
regarding the proposed deal ("Deal") between MID and Mr. Frank Stronach. The
communications may include discussions on a specific course of actions for the
Special Committee to consider related to the Deal, and may also include
discussion on Company's policies, including but not limited to its operations,
structure and potential strategies to maximize shareholder value. The
Reporting Persons have, as noted, made certain recommendations to the Special
Committee of Independent Board Members. A copy of the correspondence is
attached as an exhibit hereto. During the course of such communications, the
Reporting Persons' advocacy of one or more courses of action may be deemed an
attempt to influence control over the Company's policies.
Except to the extent the foregoing may be deemed a plan or proposal, none of the
Reporting Persons has any plans or proposals which relate to, or could result
in, any of the matters referred to in paragraphs (a) through (j),inclusive, of
the instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any
time and from time to time, review or reconsider their position and/or change
their purpose and/or formulate plans or proposals with respect thereto.
Item 5. Interest In Securities Of The Issuer
- ------- ------------------------------------
(a) The percentage amount set forth in Row 13 for all cover pages
filed herewith is calculated based upon the 46,160,564 Class A Shares
outstanding as of March 20, 2008 as reported by the Company in its Report of
Foreign Private Issuer on Form 6-K for the month of May, 2008 filed with the
Securities and Exchange Commission on April 11, 2008.
(b) Number of shares as to which the person has:
(i) Sole power to vote or to direct the vote:
(a) HWCM - 4,319,900 (includes ownership reported by HW Fund
below)
(b) HW Fund - 2,533,400
(ii) Shared power to vote or to direct the vote:
(a) HWCM - 0
(b) HW Fund - 0
(iii) Sole power to dispose or to direct the disposition of:
(a) HWCM - 5,314,800 (includes ownership reported by HW Fund
below)
(b) HW Fund - 2,533,400
(iii) Shared power to dispose or to direct the disposition of:
(a) 0
(b) 0
Note that certain of HWCM's clients have retained voting power over the
Class A Shares that they beneficially own. Accordingly, HWCM has the
power to dispose of more Class A Shares than it can vote.
(c) Information concerning transactions relating to the shares
offered through open market transactions by the reporting persons during the
past sixty days are listed below.
NONE
(d) The securities as to which this Schedule is filed by HWCM, in
its capacity as investment adviser, are held in HWCM's custodial account for
the benefit of its clients. These clients have the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds from the sale
of, such securities. No such client is known to have such right or power with
respect to more than five percent of this class of securities, except as
follows:
HW Fund: The Board of Trustees of the HW Fund can direct the disposition of
dividends received by such fund and can dispose of such securities.
HWCM disclaims beneficial ownership of all securities owned for the benefit
of its clients.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings Or
- ------ -------------------------------------------
Relationships With Respect To Securities Of The Issuer
------------------------------------------------------
Except as described above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting Persons
or between such persons and any other person with respect to any securities of
the Company, including but not limited to the transfer or voting of any
securities of the Company, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of profits or
loss, or the giving or withholding of proxies.
Item 7. Materials To Be Filed As Exhibits
---------------------------------
Letter to the Special Committee of the Independent Board Members of
the Company.
<PAGE>
SIGNATURES
----------
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Date: April 17, 2008
Hotchkis and Wiley Capital Management, LLC
By: /s/ Anna Marie Lopez
Name: Anna Marie Lopez
Title: Chief Operating Officer
Hotchkis and Wiley Mid-Cap Value Fund
By: /s/ Anna Marie Lopez
Name: Anna Marie Lopez
Title: President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>2
<FILENAME>mimbdltr.txt
<TEXT>
HOTCHKIS AND WILEY CAPITAL MANAGEMENT
725 South Figueroa Street, 39th Floor - Los Angeles, California 90017-5439 -
Tel 213.430.1000 - Fax 213.430.1001 - www.hwcm.com
April 14, 2008
To the Special Committee of Independent Board Members:
John Barnett, Lead Director
Neil G. Davis, Director
Philip K. Fricke, Director
Manfred Jakszus, Director
c/o MI Developments, Inc.
455 Magna Drive
Aurora, Ontario
Canada
L4G 7K1
Dear Special Committee of Independent Board Members:
Hotchkis and Wiley Capital Management strongly opposes the proposed
deal between MI Developments (NYSE: MIM) and Mr. Frank Stronach,
Chairman of the Board, that was announced on Monday March 31, 2008. We
ask that you reject this deal which, in our estimation, will cost
shareholders 47% of the existing market capitalization.
Hotchkis and Wiley, on behalf of its clients, has been a major
shareholder of MI Developments (MID) since its spin off in August 2003,
and currently holds approximately 12% of the outstanding stock.
Hotchkis and Wiley is a traditional investment manager. As a fiduciary
to our clients, we have analyzed the proposed deal and would like to
share our analysis with you:
The proposed deal does not reflect an arms-length transaction, but
rather an appalling and unjustified transfer of assets from
shareholders to Mr. Stronach. We estimate this deal transfers $12.50
per share from its rightful owners to Mr. Stronach. (See the attached
exhibit).
This deal gives Mr. Stronach more than $325 million of shareholder
value on day one. In addition, this deal gives Mr. Stronach control of
a partnership funded with another $220 million of shareholder assets
which he can use to support his controlled entity Magna Entertainment
(MECA). Magna Entertainment currently has a going concern
qualification on its audit report and we have little expectation of a
return on any additional capital invested there.
When you review this deal, we ask that you exercise your Fiduciary Duty
and your Duty of Care. We ask that you perform a rigorous financial
analysis of this deal versus
1
the Board's existing plan. We ask you to make public your calculations
on valuation of this deal versus valuation of the Board's existing plan
so shareholders will be fully informed when they vote. We want to be
sure there is adequate and appropriate disclosure. We look forward
to reviewing those calculations.
As shareholders of MID, we have felt oppressed by Mr. Stronach for some
time. In 2005, Mr. Stronach used his super voting power to block a
shareholder proposal that had overwhelming support (92% of the publicly
held Class A shares that were voted). Interestingly, many of the
components included in that proposal such as separating MECA,
increasing the payout ratio at MID, and accepting more leverage at MID
are now acceptable to Mr. Stronach in this deal. The difference
between the current proposal and the 2005 proposal is the original
proposal did not include any money or assets transferred from
shareholders to Mr. Stronach. It appears he was never against the
principles of the original proposal, it just did not reward him enough
personally.
In addition, Mr. Stronach has overseen hundreds of millions of MID's
dollars invested into Magna Entertainment, where he is Chairman and
CEO. These investments have been made with the Board's complicity and
one can question whether the Board has fully carried out its duties,
especially, since many of these investments appear to have been made at
below market terms and there has clearly been a conflict of interest
present. We assume that other shareholders who have indicated support
for this deal have felt coerced to do so because they lacked faith in
the Independent Board Members to protect their rights.
We recommend that the Board explicitly forbid any future investments
into MECA. Going forward, if Mr Stronach desires to invest in MECA, he
should fund it with his own money, not that of our company. We believe
the existing MECA shares should be sold or immediately spun out to MID
shareholders and the $247 million note should be sold to a third party
in an arms length transaction. This will forever separate MECA and
free up MID's capital for distributions.
The Board has in place an existing plan to improve shareholder value.
Unfortunately, that plan has not been executed. The existing plan
includes increasing MID's financial leverage, increasing dividends at
MID, repurchasing MID shares and rationalizing MID's relationship with
MECA. Execution of the Board's existing plan will return significantly
more value to existing shareholders than the proposed deal with Mr.
Stronach. As stated above, under the Board's existing plan our
estimate is shareholders would receive at least $12.50 per share of
extra value,,or nearly 47% of the existing stock price.
As patient, long term shareholders of MID, we request the Special
Committee of Independent Board Members to:
1) Exercise your Fiduciary Duty and your Duty of Care.
2) Quantify the value shareholders and Mr. Stronach would each receive
in this deal versus the Board's existing plan; show exactly how
those financial calculations are computed; and make those
calculations publicly available for all shareholders to review and
analyze before they are asked to vote.
2
3) Provide an explicit and transparent plan of action which forbids
any and all future investments in MECA so future funds or assets
will not be transferred from shareholders to Mr. Stronach or his
controlled entities.
4) Reject this coercive deal and execute the Board's existing plan
which does not benefit Mr. Stronach at the expense of other
shareholders.
Hotchkis and Wiley intends to vote all its shares against the proposed
deal as it currently stands.
Sincerely,
/s/ David Green
David Green
Principal and Portfolio Manager
cc: Frank Stonach, Director and Chairman of the Board
Dennis J. Mills, Director
Barry B. Byrd, Director
Judson D. Whiteside, Director
Senator Rod A. A. Zimmer, Director
John D. Simonetti, Chief Executive Officer and Director
Disclosure Statement
This letter does not constitute an offer to sell or the solicitation of
an offer to buy any securities. Investment analyses are proprietary
and confidential and generally based on publicly available information
(including information obtained from company management). Certain
information may have been obtained from proprietary broker-dealer
and/or independent third-party research. Information obtained from
these sources is considered reliable, but its accuracy or completeness
cannot be guaranteed. The research herein is not intended to be, and
should not be, relied on for investment advice. Any forecasts and
estimates made cannot be guaranteed. The opinions expressed are as of
April 14, 2008, and are subject to change and may not be accurate
reflections after that date.
3
Exhibit to Letter
Explanation of Value Transfer from MID to Mr. Stronach:
1. At a cost of $25 million, Mr. Stronach will receive 51% of a
limited partnership which includes: 1) $150 million of cash,
2) a $247 million note receivable, 3) land worth $55 million. The
total partnership has an initial value of $452 million and Mr.
Stronach's 51% share is worth $230 million. The net transfer of
value is $230 million less $25 million cost or $205 million.
2. Mr. Stronach would receive 10% of MID for free. We would expect
MID to have AFFO of approximately $99 million if this transaction
were effectuated. $185 million rental revenues less $20 million
G&A less $55 million interest expense less $10 million taxes less
0.5 million CAPEX. At a 12.5x AFFO multiple the value of the
restructured company would be $1.24 billion. Mr. Stronach's 10%
share would represent a value of $124 million ($99 million x 12.5
x 10%). The net transfer of value is $124 million less $0 cost
or $124 million.
Total Value transferred to Mr. Stronach: $205 million + $124
million = $329 million.
In addition, Mr. Stronach would control a limited partnership that
he could use to fund Magna Entertainment. The MID board would have
no right to exercise any control over that partnership even though
MID would technically own 49% of the assets, or $220 million. We
assume Mr. Stronach would impair the value of those assets as he has
clearly shown a proclivity to value horse racing at Magna
Entertainment above a return on investment. Ironically, this
transaction would essentially give license to Mr. Stronach to
fritter away another $220 million of company assets without any
governance or control.
Shareholder funds at risk to further destruction by Mr. Stronach: $220 million
The total value transfer:
Mr. Stronach's net value of the Limited Partnership $205 million
Mr. Stronach net value of his new interest in MID $124 million
------------
Net Gift to Mr. Stronach $329 million
Shareholder funds at risk to further destruction by Mr. Stronach $220 million
------------
Total Funds Transferred or at Risk $549 million
Expenses to Execute the Deal $35 million
------------
Our Estimate of Total Value Shareholder Value Destroyed $584 million
------------
Fully Diluted Shares Outstanding 46.7 million
Value destruction of this deal $12.50/share
Current value per Share: $26.75
% of Market Cap Transferred from Current Shareholders 47%
4
</TEXT>
</DOCUMENT>
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