Prime Highlights:
- Shares in Toyota Industries will increase 23% as the company will be acquired by Toyota Motor in a ¥6 trillion deal.
- Cross-shareholdings will be removed under the takeover and corporate management in the Toyota group will be improved.
Key Facts:
- Toyota Industries is a major supplier of Toyota Motor and produces engines, forklifts, and auto components like the RAV4.
- The agreement is part of a wider campaign in Japan to eliminate cross-shareholdings between group companies.
Key Background:
Toyota Industries, originally established in 1926 under the name of Toyoda Automatic Loom Works, is currently a huge maker of auto accessories, engines, and industrial machines. Toyota Industries has big cross-holdings with Toyota Motor, cross-shareholdings: Toyota Motor is holding around 24% in Toyota Industries, and Toyota Industries is holding over 9% in Toyota Motor, and large holdings in Denso Corporation.
The ¥6 trillion ($42 billion) bid is seen as a Toyota Motor bid to acquire its largest supplier. The acquisition is being led by Toyota Chairman Akio Toyoda and his family members, who are considering funding it through private investments and loans from a number of Japan’s largest banks. It is one of the strands of a larger policy of unwinding complex cross-holdings between companies and strengthening corporate governance within the Toyota group, which has become fairly prevalent on the Japanese corporate landscape.
In spite of reports, Toyota Industries clarifies that up to now there has not been any bid for a buyout in writing. It has, however, confirmed that there have been bids to take the company private but nothing is decided yet. The planned merger arrives at a time when Japanese companies are under increasing pressure to get rid of cross-shareholdings, which have been criticized as having the tendency to discourage openness and shareholder value.
If followed through on, the takeover would involve fundamental changes to Toyota Industries’ core business, i.e., its materials handling operation. It would be merged with Toyota Motor’s whole motor vehicle operations in a bid to further centralize the group’s supply chain. The news has met with general acceptability from the market, and Toyota Industries stocks will likely peak at the day’s high, an indicator of investors’ acceptance of the offer.
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