(Recasts. In U.S. dollars)
By Frank Pingue
TORONTO, March 7 (Reuters) - MI Developments MIMa.TO, the property arm of Canadian auto-parts empire Magna International MGa.TO, said on Wednesday it is reevaluating its relationship with its horse-racing subsidiary Magna Entertainment MECa.TO.
On a conference call to discuss MID’s return to profit in the fourth quarter, chief executive John Simonetti said MID finds it a continuing challenge to monitor Magna Entertainment and its financial problems.
“We and MEC continue to evaluate alternatives to resolve these issues and, more importantly, we continue to determine to what extent MID will be involved in implementing a solution that is acceptable to all our stakeholders,” Simonetti said.
Some MID shareholders have complained bitterly that the company has put too much money into risky deals at Magna Entertainment, which owns major horse-racing tracks in the United States.
Minority MID shareholder Greenlight Capital, a New York-based hedge fund, has sued MID and chairman Frank Stronach, accusing them of improperly steering millions of dollars into risky ventures at Magna Entertainment, of which MID owns 60 percent.
The lawsuit called on MID to sell or spin off its stake in Magna Entertainment, whose holdings include the famed Santa Anita and Pimlico racetracks.
Stronach, the founder of Magna International who controls all the Magna companies through a dual-class voting structure, rejected the proposal and easily fended it off in a shareholder vote.
Last October the Ontario Superior Court of Justice dismissed an oppression application filed by Greenlight.
But Greenlight, which has about a 10 percent stake in MID class A shares, appealed the Oct. 30 decision in November and filed an appellant’s factum on Jan. 30.
“We anticipate filing our factum in the second quarter of 2007 and that the appeal hearing will take place approximately three to six months after the date of such filing,” said Richard Crofts, general counsel at MID.
Earlier on Wednesday, MID said it returned to profit in the fourth quarter as it took advantage of asset sales at Magna Entertainment.
The company said its consolidated profit rose to $28.5 million, or 59 cents a share, for the quarter ended Dec. 31, up from a loss of $6 million, or 13 cents a share, in the year-before period.
Consolidated revenue during the fourth quarter rose nearly 6 percent to $172.4 million from C$162.8 million.
Apart from Magna Entertainment, MID said profit at its real estate business rose 21 percent to $23 million from $19 million.
Revenue rose nearly 16 percent to $46.6 million from $40.3 million, helped by rent increases
MID also said its funds from operations, a formula used to analyze real-estate company performance, rose to $33.9 million, or 70 cents a share, from $28.7 million, or 60 cents a share.
Shares of MID, up about 1.5 percent in 2007, were down 36 Canadian cents, or 0.8 percent, at C$42.34 at midafternoon on Wednesday on the Toronto Stock Exchange.