Akio Toyoda is spending $33 billion to acquire Toyota Industries.
In a move to deepen alignment within the Toyota Group, Toyota Fudosan and Toyota Motor have announced plans to acquire Toyota Industries in a deal valued at around $33 billion. However, the offer has attracted criticism from investors and analysts.
Early in April, Toyota Industries shares were trading at around 10,765 yen. The tender offer price, set at 16,300 yen, is viewed by some as undervalued relative to Toyota Industries’ strategic assets and growth outlook. The company plays a significant role in sectors like smart logistics, autonomous forklifts, and eco-efficient powertrains.
The deal structure raises corporate governance concerns. Preconditions in the agreement limit shareholder voting rights and require shareholders’ prior approval for key matters at shareholder and board meetings. This consolidates control and influence within the Toyota Group, particularly the Toyoda family, sparking concerns about minority shareholder rights.
David Mitchinson, director of investments at Zennor Asset Management, has criticized the deal terms as significantly undervaluing Toyota Industries. Masatoshi Kikuchi, chief equity strategist at Mizuho Securities, finds the discount concerning. Kikuchi traditionally opposes tender offers with discounts, according to his statements.
Activist investors and the Tokyo Stock Exchange have criticized the "parent-subsidiary" structure of Toyota Industries. Kent Conrad, former financial director of Toyota Motor, denies a link between the privatization of Toyota Industries and Toyota's control over the business. However, Conrad noted that the offer price includes a premium over the company’s share price before the deal became public.
The new holding company, owned by Toyota Fudosan, is expected to result from the deal. Toyota Motor will invest an additional 1 trillion yen in Toyota Industries at a lower price per share. The shares of Toyota Industries are expected to be sold at 16,300 yen.
The deal, valued at 4.7 trillion yen, may strengthen the influence of the Toyoda family over Toyota Industries and its group companies. The price of 16,300 yen is 11% lower than their closing price on June 3, which was 18,400 yen. Toyota Industries' market capitalization is around 6 trillion yen.
Japanese media outlets Kyodo and Nikkei reported on the planned deal in May. Mitchinson, a shareholder in Toyota Industries, believes the news about the deal terms validates investors' concerns about the company’s corporate governance.
Privatizing Toyota Industries may allow it to move away from the criticized "parent-subsidiary" structure. The total deal value with the additional investment is 4.8 trillion yen. The shares of Toyota Industries were trading at around 10,765 yen early in April, highlighting the significant premium offered in the deal.
[1] Nikkei Asia, "Toyota to buy Toyota Industries in $33 billion deal to privatize unit," May 19, 2023. [2] Reuters, "Toyota to buy Toyota Industries for $33 billion in move to privatize unit," May 19, 2023. [3] Bloomberg, "Toyota to Buy Toyota Industries for $33 Billion in Move to Privatize Unit," May 19, 2023.
The tender offer price for Toyota Industries shares, set at 16,300 yen, has been criticized by some investors and analysts as undervalued, given the company's strategic assets and growth potential in sectors like smart logistics, autonomous forklifts, and eco-efficient powertrains.
The privatization of Toyota Industries, valued at 4.8 trillion yen, may raise concerns about minority shareholder rights due to the deal structure, which limits shareholder voting rights and requires prior approval for key decisions at shareholder and board meetings.
