-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ue8n17t/dNXY6hHGT5No6/ymo3qCuivwGBBzMIdkKwuRdAbfENoc3OSG/qr6TkCK vE4Zd/Hr+Km9W96uX+aiCw== 0001164833-08-000102.txt : 20080417 0001164833-08-000102.hdr.sgml : 20080417 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 SC 13D 1 mim13d00.txt 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) 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 - ------------==================================================================== 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 - ------------==================================================================== 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. 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 EX-1 2 mimbdltr.txt 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 -----END PRIVACY-ENHANCED MESSAGE-----