Kristina Roberts
Toyota Motor Corporation, a major car company from Japan, recently announced a plan to buy all the shares of its related company, Toyota Industries, for about $33 billion. This means Toyota wants to take full control and make Toyota Industries a private company, no longer listed on the stock market. However, this plan has upset many investors, especially in the United States, who feel the offer is too low and not fair.
Toyota Industries is an important part of the Toyota Group. It makes various products like car parts, forklifts, and textile machines. It also supplies parts to other car companies, including Tesla. Toyota Industries has been a public company, meaning people could buy and sell its shares on the stock market. Now, Toyota wants to buy all those shares and make it private.
The offer from Toyota is to pay 16,300 yen for each share of Toyota Industries. This is about 23% more than the share price before the news came out in April. But just before the official announcement, the shares were trading at 18,400 yen. So, the offer is actually lower than the recent market price. After the announcement, the share price dropped to 16,205 yen, showing that investors were not happy with the offer.
Some investors, like David Mitchinson from Zennor Asset Management, said, “We welcome the attempt to clear up the parent-subsidiary governance issue. We don’t like the price.” This means they agree with the idea of simplifying the relationship between Toyota and Toyota Industries but think the price offered is too low.
Another expert, Nicholas Benes, who works on corporate governance in Japan, said, “There’s huge hidden asset value in the land and other holdings at Toyota Industries. And the price should have been much higher.” He believes that Toyota Industries owns valuable properties and assets that are not being considered in the offer price.
The plan includes creating a new holding company to manage the deal. Toyota Fudosan, a real estate company in the Toyota Group, will invest 180 billion yen. Akio Toyoda, the chairman of Toyota Motor, will invest 1 billion yen. Toyota Motor itself will invest 700 billion yen in non-voting preferred shares. This structure has raised concerns because it seems to give more control to the Toyoda family and less to other shareholders.
In Japan, there has been pressure from regulators to improve corporate governance. This means making companies more transparent and fair to all shareholders. One issue has been “parent-child listings,” where both a parent company and its subsidiary are listed on the stock market. This can be unfair to minority shareholders. By taking Toyota Industries private, Toyota aims to address this issue. However, the way they are doing it has raised questions.
Some investors feel that the deal is designed to benefit the founding Toyoda family and the management, rather than all shareholders. They are worried that the real buyer, Toyota Motor, is being hidden behind other companies to avoid criticism. There is also concern that the deal undervalues Toyota Industries’ assets, especially its real estate holdings.
The deal requires that 42.01% of the shares be tendered by December for it to go through. This means that a significant number of shareholders need to agree to sell their shares at the offered price. Given the current dissatisfaction, it is uncertain whether this threshold will be met.
Toyota Industries has been working to reduce cross-shareholdings, which means owning shares in related companies. This is part of a broader effort to improve corporate governance. For example, in October 2024, Toyota Industries sold all its shares in Denso Corporation, another company in the Toyota Group. This move was aimed at improving profitability and focusing on core businesses.
Despite these efforts, the current takeover plan has highlighted ongoing challenges in balancing corporate control with shareholder interests. Investors are calling for more transparency and fair valuation in such deals. They want to ensure that all shareholders are treated equally and that the true value of companies is recognized.
In summary, Toyota’s plan to take over Toyota Industries has sparked controversy. While the goal is to simplify the corporate structure and improve governance, many investors feel that the offer undervalues the company and benefits a select few. The outcome of this deal will be closely watched, as it could set a precedent for how similar situations are handled in the future.
