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Magna Announces Board Approval of Previously Announced Arrangement Involving Russian Machines

AURORA, Canada, July 26, 2007 -- Magna International Inc. (TSX: MG.A, MG.B; NYSE: MGA) today announced that its Board of Directors has approved a definitive Plan of Arrangement and related agreements with respect to the previously announced proposed strategic investment in Magna by Russian Machines, a wholly owned subsidiary of Basic Element Limited.

Rationale

The strategic investment is designed to accelerate Magna's strategic efforts to capitalize on significant growth opportunities in the growing Russian automotive market as well as other emerging markets. In targeting the Russian market, Magna believes that the best way to minimize risk and maximize return is by working together with an established industrial partner. It also believes that having Russian Machines and its controlling shareholder Basic Element as a strategic partner, with an aligned interest through a significant ownership stake in Magna, will assist Magna in carrying out its expansion strategy in Russia and other emerging markets. Basic Element is one of the largest, privately held industrial conglomerates in Russia and its subsidiary Russian Machines owns a majority interest in GAZ Group, which is Russia's second-largest automotive manufacturer.

Magna believes that, if implemented, the proposed Arrangement will achieve a greater alignment of interests between the Stronach Trust, which currently controls Magna, Russian Machines and other Magna shareholders and will create "checks and balances" on the exercise of the Stronach Trust's controlling interest in Magna by virtue of Russian Machines' Board nomination rights and new corporate governance guidelines that will require certain major transactions to be approved by two-thirds of the Board members. Further, the proposed alliance is designed to preserve the fundamental business philosophies and operating principles that have been the cornerstone of Magna's success, including Magna's Corporate Constitution and its Employee Charter.

Overview of Arrangement

The terms of the Arrangement and related agreements are consistent in all material respects with those announced jointly by Magna and Basic Element on May 10, 2007 and will be described in detail in the management information circular/proxy statement (the "Circular") to be mailed on or about August 1, 2007 to Magna shareholders of record as of July 16, 2007 in respect of the special meeting of Magna shareholders currently scheduled to take place on August 28, 2007 (subject to court approval) to approve the Arrangement. The Circular will contain relevant information concerning the Arrangement, including a description of (i) the definitive transaction terms and conditions, (ii) the Board's recommendation to shareholders, the factors underlying the Board's recommendation and a description of the review conducted by the Special Committee of independent directors and its legal and financial advisors, (iii) the shareholder votes and court and regulatory approvals required to carry out the Arrangement, which votes will include a "majority of minority" of the votes cast by holders of Class A Subordinate Voting Shares, voting separately as a class, and (iv) the dissent rights available to "minority" Class B shareholders if the Arrangement includes the proposed buyback of the Class B Shares other than those currently controlled by the Stronach Trust. The remainder of this press release is qualified by the more detailed information appearing in the Circular and shareholders are urged to review the Circular carefully.

Under the terms of the proposed Arrangement, Russian Machines would invest approximately US$1.54 billion to acquire indirectly 20 million Magna Class A Subordinate Voting Shares from treasury. A new Canadian holding company ("Newco") would hold the respective holdings in Magna of the Stronach Trust and Russian Machines, as well as a portion of the respective holdings in Magna of Donald Walker, Siegfried Wolf, Vincent Galifi, Jeffrey Palmer and Peter Koob (collectively, the "Principals"), all of whom are members of Magna's executive management. Subject to approval by a majority of the votes cast by "minority" Class B Shareholders, the proposed Arrangement would also involve the purchase by Magna for cancellation of all outstanding Class B Shares not held by the Stronach Trust for CDN.$114.00 in cash per Class B Share (the "Class B Share Acquisition"). If the Arrangement includes the Class B Share Acquisition, the number of votes attached to the Class B Shares would be reduced from 500 votes to 300 votes per share (the "Class B Share Vote Reduction").

Upon the completion of the proposed Arrangement, Newco will hold indirectly 726,829 Class B Shares and 20,605,000 Class A Subordinate Voting Shares. Assuming approval of the Class B Share Acquisition, Newco will indirectly hold 100% of the outstanding Class B Shares and approximately 16% of the outstanding Class A Subordinate Voting Shares, collectively representing approximately 68.8% of the total voting power of all the outstanding shares of Magna. In connection with the Arrangement, the Stronach Trust and Russian Machines will enter into certain agreements governing their relationship as shareholders, including the voting of the Magna shares held indirectly by Newco and the terms upon which Russian Machines may elect to withdraw, or the Stronach Trust may cause Russian Machines to withdraw, its investment in Newco and terminate those governance arrangements.

The Principals, the Stronach Trust and Stronach & Co., an associate of Magna's Chairman, Mr. Frank Stronach, have interests in the Arrangement that are different from other shareholders. Those interests were identified in Magna's press release dated May 10, 2007 and will also be disclosed in the Circular.

Magna's Board approval today of the Arrangement and related agreements followed the report and favourable recommendation of its Special Committee of independent directors formed to review and consider the Arrangement and related transactions. In doing so, the Board determined that the Arrangement is in the best interests of Magna and its shareholders and authorized the submission of the Arrangement to holders of Magna's Class A Subordinate Voting Shares and Class B Shares for their approval as required under applicable law. CIBC World Markets Inc. ("CIBCWM"), the independent financial advisor to the Special Committee, concluded that, as of May 9, 2007 (the date the Board approved the previously announced Transaction Agreement with Russian Machines), the consideration of CDN$114.00 per Class B Share to be offered to each minority holder of Magna's Class B Shares under the Arrangement is fair, from a financial point of view, to the minority holders of Magna Class B Shares. A copy of the CIBCWM fairness opinion, the factors considered by the Special Committee and Magna's Board and other relevant background information will be included in the Circular.

Subject to court approval, Magna expects to hold the Special Shareholders' Meeting on August 28, 2007 in Toronto and expects that the Arrangement, if approved, will become effective in September 2007, subject to receipt of necessary regulatory approvals. The Arrangement will require the approval of shareholders, including:

- a majority of the votes cast by Magna Class A Subordinate Voting Shareholders and Class B Shareholders (excluding certain "insiders" as defined in the Toronto Stock Exchange Company Manual), voting together as a single class;

- a majority of the votes cast by the "minority" Class A Shareholders, voting separately as a class; and

- with respect only to the Class B Share Acquisition, a majority of the votes cast by "minority" Class B Shareholders, voting separately as a class.

Magna and certain parties related to Magna, including its directors and senior officers, may not vote their Class A Subordinate Voting Shares or Class B Shares for the purposes of the "majority of the minority" approval requirements. If the Class B Share Acquisition is not approved by the "minority" Class B Shareholders, but the Arrangement is otherwise approved by the requisite votes of shareholders, then the Arrangement, excluding the Class B Share Acquisition and the Class B Share Vote Reduction, will proceed (subject to the satisfaction or waiver of all other conditions).

The Arrangement requires court approval. Prior to the mailing of the Circular, Magna will obtain an interim court order, which will provide for the calling and holding of the Special Shareholders' Meeting, the grant of dissent rights to "minority" holders of Class B Shares in respect of the Class B Share Acquisition, and other procedural matters. If the Arrangement is approved by shareholders at the Special Shareholders' Meeting in the manner required by the interim order, a hearing in respect of a final order will take place to consider, among other things, the fairness of the Arrangement.

Proposed Substantial Issuer Bid

On May 10, 2007, in connection with, and conditional upon completion of, the Arrangement, Magna announced its intention to make a substantial issuer bid to purchase up to 20 million of its outstanding Class A Subordinate Voting Shares. The issuer bid is expected to take the form of a modified "Dutch auction", whereby Magna will offer a range of prices within which it is willing to repurchase such Class A Subordinate Voting Shares. The issuer bid is expected to be an offer to purchase up to 20 million Class A Subordinate Voting Shares at an aggregate price of not more than US$1,536,600,000. Pricing information and other material terms and conditions are expected to be determined by the Board and publicly announced prior to the Special Shareholders' Meeting.