TOKYO: Toyota Motor has announced that it is looking into the possibility of buying key parts supplier Toyota Industries, a move estimated to cost around US$42 billion.
In a filing with the Tokyo Stock Exchange on Saturday, the automaker stated, “We are currently considering different options, including a partial investment,” following reports about the potential acquisition.
According to Bloomberg News, Chairman Akio Toyoda, along with his founding family, has suggested a buyout of Toyota Industries in a deal valued at 6 trillion yen (approximately US$42 billion).
Toyota Industries, with a market valuation of 4 trillion yen, acknowledged in a statement that it has received offers related to going private via a special purpose vehicle, but it refuted claims that there was a buyout offer from Akio Toyoda or the Toyota group.
Two insider sources revealed that Toyota Industries is considering soliciting funding for a buyout from Toyota and its affiliated companies, as well as major banks. They also noted that the proposal did not originate from Akio Toyoda or the Toyota group.
These sources, who chose to remain unnamed as the information is not public, mentioned that going private would facilitate better corporate governance within the Toyota group by eliminating cross-shareholdings.
Both Toyota and Toyota Industries confirmed in their statements that no decisions have been made yet.
As of September last year, Toyota held a 24 percent stake in Toyota Industries, while Toyota Industries owned 9.07 percent of Toyota and 5.41 percent of Denso, another important supplier.
Toyota Industries has been under pressure from shareholders to dismantle its cross-shareholdings to improve returns and enable more investments.
It has already divested some of its cross-shareholdings, including shares in Aisin, another key supplier within the Toyota group.
One source noted that going private would allow Toyota Industries to concentrate on its growth strategies without the pressure to deliver immediate shareholder returns.
Cross-shareholdings, a common practice in Japan where companies own shares in each other, have come under increasing scrutiny from both regulators and shareholders, as this practice can shield management from fulfilling general shareholders’ interests.
Toyota Industries, originally known as Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to produce automatic looms. The company’s automotive division was established later and eventually became Toyota Motor. Today, Toyota Industries is a leading manufacturer of forklifts and produces the RAV4 sport utility vehicle and engines for Toyota Motor.
