In a strategic move to strengthen the Toyoda family’s control over Japan’s biggest business empire, Akio Toyoda, chairman of Toyota Motor Corp., is leading a group that has agreed to privatize Toyota Industries Corp. for ¥4.7 trillion ($33 billion). This deal marks a significant shift in the structure of Toyota Industries, which produces a range of products from textile looms to vehicle parts and forklifts. The buyout is expected to deepen the family’s grip on the company, despite a controversial discount to its current market value.
Deal Structure and Funding
The acquisition proposal includes a tender offer of ¥16,300 per share, which represents an 11% discount to Toyota Industries’ closing price. The buyout will be supported by major financial institutions such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group, which will provide ¥2.8 trillion in loans to fund the transaction. This move is part of a broader effort to streamline the ownership structure, as Japan has been encouraging large companies to unwind cross-shareholding arrangements with subsidiaries.
Strategic Implications for the Toyoda Family
The buyout deal has raised concerns among some shareholders, who argue that the tender offer price is too low compared to Toyota Industries’ intrinsic value. Despite the discount, the Toyoda family’s investment vehicle, Toyota Fudosan Co., will play a major role in the acquisition. The holding company formed for the deal will be predominantly owned by Toyota Fudosan, with Akio Toyoda personally investing ¥1 billion into the venture. This move is expected to provide more stability to the family’s business empire, particularly after the resignation of Toyoda as CEO of Toyota Motor in 2023.
Concerns and Reactions from Shareholders
David Mitchinson, chief investment officer at Zennor Asset Management, which holds shares in Toyota Industries, voiced concerns over the low tender price. He argued that the deal favored the Toyota group rather than the interests of Toyota Industries shareholders. The offer comes as Toyota Industries’ stock has surged by over 40% since the news of the buyout leaked in April, leading some to question whether the offer sufficiently reflects the company’s value. Nonetheless, the deal is set to proceed, with Toyota Motor making an equity investment of ¥1 trillion in the holding company.
Impact on Toyota Group and Governance
This buyout represents a significant shift in Toyota’s internal governance, as the move is seen as a response to Japan’s push for improved corporate transparency and governance. The privatization of Toyota Industries will dissolve some of the cross-shareholding relationships between Toyota Industries and its subsidiaries, such as Toyota Motor, Aisin Corp., Denso Corp., and Toyota Tsusho Corp. However, Toyota Motor will continue to invest in Toyota Industries through non-voting preferred shares, maintaining a level of influence over the company.
Looking Ahead
The privatization deal is expected to be completed in the coming months, with an annual shareholder meeting scheduled for June 10 for Toyota Industries, followed by Toyota Motor’s meeting two days later. This buyout comes at a crucial time for Toyota, as it seeks to restore trust in its governance following recent regulatory scandals involving subsidiaries. Despite the controversy surrounding the discount on the tender offer, this move could pave the way for more streamlined operations and governance at Toyota Industries, benefiting the overall Toyota Group in the long term.
