UPDATE 2-Stronach set to give up control of real estate firm

* Stronach in deal to give up super voting shares of MID

* Stronach will exchange his control for racing assets

* Shareholders Farallon, Greenlight expected to back deal

* Shares halted after 4.4 percent rise on the NYSE
(Adds share prices, background on Stronach, MID)

By Emily Chasan

NEW YORK, Dec 21 (BestGrowthStock) – Canadian billionaire Frank
Stronach is set to give up control of his real estate company,
MI Developments (MIMa.TO: ) (MIM.N: ) (MIMb.TO: ), in a new deal with
shareholders, according to two sources familiar with the

Stronach, who holds a controlling voting stake in the
company, is prepared to exchange his control of the $800
million real estate development company for some of its horse
racing track assets, these sources said.

The deal, which will swap his special voting shares in the
company for the racing assets, is expected to get the support
of some of the firm’s big shareholders like hedge funds
Farallon Capital and David Einhorn’s Greenlight Capital.

As a result of the deal, Stronach will no longer control
the board, and a new board will be elected by the new
shareholders, said these sources, who asked not to be named
because they were not authorized to speak with the media about
the talks.

MI Developments shares rose 4.4 percent on the New York
Stock Exchange before its stock was halted on Tuesday and its
Toronto Stock Exchange-listed stock was also halted for pending

Stronach, who is founder of auto parts company Magna
International Inc (MG.TO: ), may still retain a smaller stake in the
company after the deal, which could be announced as soon as this
week and is expected to close by April 2011, one of the people

Stronach has been the long-time chairman of the company and
took over as chief executive of the company last month. He now
controls a large number of Class A subordinate voting shares and
Class B shares in the company, which together amount to about 60
percent of the total voting power of MI Developments’ outstanding

MI Developments’ horse racing and gaming assets include
Santa Anita Park, Golden Gate Field, Portland Meadows,
Gulfstream Park, Maryland Jockey Club and various horse racing
technology assets — all formerly owned by now-bankrupt Magna
Entertainment (MECAQ.PK: ).

The deal would be somewhat of a victory for Einhorn, who
has been a big holder of the company’s shares since it was spun
off from Magna International in 2003. Over the past few years,
the hedge fund manager has publicly complained that the board
of the company was not acting in the best interest of its
shareholders and even sued the company over his complaints.
Einhorn eventually lost the suit, but continued to hold the
company’s shares.

MI Development’s primary tenants are affiliates of Magna
International, including some of its factories, and it has several
other industrial, mixed-use and residential projects.

A spokesperson for Farallon declined to comment, and
Greenlight Capital declined to comment on the deal. A MI
Developments representative did not respond to requests for

The proposed deal is also a change in strategy for Stronach
and the company, which has been approached by several investors
in the past few months. A company owned by technology
entrepreneur Halsey Minor approached the firm last month about
buying its racing assets for about $300 million. In October,
Stronach, through his acquisition company ST Acquisition, had
offered to buy the whole firm in a deal valuing the company at
about $607 million. However, the company now has a market
capitalization of about $800 million.

The company’s shares were halted at about $19.05 on the New
York Stock Exchange on Tuesday. On the Toronto Stock Exchange,
the company’s class A shares were halted at C$19.32.
(Additional reporting by Alina Selyukh, John McCrank and
Jennifer Ablan; Editing by Derek Caney, Phil Berlowitz)

UPDATE 2-Stronach set to give up control of real estate firm