TORONTO, June 25 (Reuters) – Magna International Inc (MGa.TO) must provide shareholders with more information in order to proceed with a vote on a plan that would pay its founder around $900 million for giving up his controlling shares, a Canadian regulator ruled on Thursday.

The Ontario Securities Commission ruled that it was “not persuaded” that the auto parts maker’s plan was abusive to shareholders. But it said Magna must amend the information circular sent to investors if it wishes to move ahead with a vote on the deal.

“Whatever views we may have as to the terms of the proposed transaction and its fairness to shareholders, we believe that it is the shareholders of Magna that should ultimately decide whether the proposed transaction proceeds,” the provincial securities regulator said in a written ruling released late on Thursday.

“If Magna wishes to proceed with shareholder approval of the proposed transaction or any similar modified transaction, it must amend the circular in accordance with this decision.”

Magna did not immediately respond to an e-mail seeking comment on the decision.

Magna’s Class A shares jumped more than 20 percent in May after the world’s No. 3 auto parts maker announced the plan that if passed, would release the iron grip Frank Stronach has held on the company he founded in the late 1950s in a garage.

The company proposes to pay Stronach $300 million in cash and 9 million class A shares in order to give up his controlling class B shares. Magna’s Class A shares closed at C$73 on Thursday.

Each class B share carries 300 votes, whereas each class A share carries one vote. That allows Stronach to control the company while owning just a small part of the equity.

CHALLENGES TO DEAL

Earlier this month two major Canadian pension funds came out swinging against the plan, calling the payoff “unreasonable” and “fundamentally unfair”.

The proposal was then challenged by staff at Ontario’s provincial securities regulator, who requested a hearing and alleged the proposal was “contrary to the public interest and harmful to the integrity of the Ontario capital markets.”

But a three-person Ontario Securities Commission panel ruled it was not convinced the proposed deal was abusive to shareholders.

“Abuse has been characterized by Commission decisions as something more than unfairness. A transaction such as this is not abusive simply because the price proposed to be paid is considered by certain investors to be outrageous,” the ruling said.

“We are not persuaded that the proposed transaction is abusive of shareholders or the capital markets within the meaning of securities law.”

The panel laid out a long list of information it said should be provided to shareholders before they would vote on the deal, including “a clear articulation” of how management and Magna’s board decided on the amount to pay Stronach.

The original shareholder vote was scheduled for June 28 but looked set to be pushed back.

The ruling said that if Magna wishes to proceed with the proposed deal, it must deliver a copy of the amended circular to the regulator at least five days before it is sent to shareholders. This would give the regulator’s staff time to raise any concerns about the level of disclosure.

Based on pre-voting results ahead of the regulatory ruling, shareholders had appeared ready to approve the plan overwhelmingly.

Stronach, 77, came to Canada from Austria as a young man with just a couple hundred dollars in his pocket and built the company into a global player. Magna came close to buying Chrysler in 2007, and nearly had a deal to buy Opel from General Motors Co [GM.UL] until GM decided to keep the European car maker.

But some shareholders have long complained about Stronach’s control of the company, his “consulting fees,” and his side projects, including the now-bankrupt Magna Entertainment horse track and entertainment venture.

The day Magna announced the plan to pay off Stronach, several analysts raised their price targets for the company, and its shares gained 14 percent. ($1=$1.04 Canadian) (Editing by Lincoln Feast)