Basic Element completes deal with Magna

Basic Element announced the completion of its previously announced US$1.54 bln strategic investment in Magna International Inc., a Canadian company listed on the Toronto and New York Stock Exchanges. The investment was made by an indirect subsidiary of Russian Machines, a subsidiary of Basic Element, through a newly-formed company owned indirectly by Russian Machines, the Stronach Trust, and certain members of Magna executive management.

Basic Element, the Stronach Trust and Magna announced the transaction on May 10, 2007. On 28 August Magna shareholders approved the transaction.

Each of the Stronach Trust and Russian Machines will be entitled to nominate six members to Magna’s Board of Directors, including at least four independent directors. Magna's Co-CEO's continue to serve as directors on the Board.

"Our strategic investment in Magna will help Magna to build a strong presence in the rapidly expanding Russian automotive market, as well as in Eastern Europe and other key markets, said Oleg Deripaska, Chairman of Basic Element's Supervisory Board and Chairman of the Board of Russian Machines. "Our combined strengths will enable us to benefit from the significant growth potential in those markets."

The main challenge facing the Russian automotive industry is its high level of vertical integration. The majority of components are made by the same company that assembles cars. This system invariably leads to high costs and a lack of flexibility, and, most importantly, it has a negative impact on the quality of Russian technology.

"Through its relationship with Magna, Russian Machines gains exposure to Magna's vast experience which will help to create a modern components industry in Russia. We will achieve this by adhering to the highest international standards," said Valery Lukin, General Director of Russian Machines.

Basic Element's international partners played a key role in the acquisition of a stake in Magna.

Part of the investment by Russian Machines has been financed by a loan secured by 20 million Class A Subordinate Voting Shares of Magna. The loan has been provided by BNP Paribas SA to a subsidiary of Russian Machines, Veleron Holding B.V. The initial loan amount is equal to US$878 million, with the BNP Paribas' commitment to increase the loan amount to up to US$1,229 bln four months after the drawdown. The loan tenor is two years.

A number of North American, European and Russian law firms advised Russian Machines on the deal, including the American firm Cravath, Swaine & Moore LLP, Canadian firm Bennett Jones, Russian company Egorov, Puginsky, Afanasev and Partners, as well as the European offices of Gibson Dunn and Crutcher LLP, and Bryan Cave, Austria's Schoenherr, Jersey's Ogiers and the Dutch law firm Van Doorne.