THE CANADIAN PRESS

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AURORA, Ont. - The boards of MI Developments Inc. (TSX:MIM.A) and Magna Entertainment Corp. (TSX:MEC.A), both controlled by Frank Stronach, are proposing a complex, multi-stage process for disentangling the two companies - a long-elusive goal of MID's minority shareholders.

In simple terms, Stronach's family trust would end up buying out other shareholders of Magna Entertainment - a horse-racing and gaming company - including MI Developments, its corporate parent.

But there are several related transactions that are necessary for the whole plan to work.

Magna Entertainment, among other things, would be on the hook to repay most of the money it owes the real-estate company and that money would be distributed to shareholders through dividends.

MI Developments would agree to buy some of Magna Entertainment's lands. It would also buy back at least US$240 million of its own shares, adopt a dividend payout ratio, and provide a new short-term loan to Magna Entertainment.

MID would also agree to stay out of the horse-racing and gaming business unless it gets approval from its class A shareholders.

A group of class A shareholders of MI Developments - a land-development company - have been fighting for years to have MID jettison the heavily indebted and unprofitable entertainment company.

MID expects to hold the special meeting of its shareholders to consider the restructuring proposal in the first quarter of 2009.

"We believe that this reorganization proposal will deliver significant value to shareholders and better align the interests of all MID shareholders," said Dennis Mills, MID's vice-chairman and chief executive officer.

"The proposal achieves many of the objectives identified by MID class A shareholders, including: a spin-off of MEC, an increased dividend, a substantial stock buyback and a forbearance agreement restricting future transactions with MEC."

Mills, a former Liberal member of Parliament, said he was optimistic that shareholders "will see the merits of this reorganization" and support the proposal.