Toyota Plans $26 Billion Buyout to Take Core Supplier Private

TOKYO: Toyota announced on Thursday that it will acquire a group supplier in a $26 billion transaction, marking a significant strategic shift for Japan’s leading corporation and highlighting the lasting impact of the founding Toyoda family. A privately held real estate firm led by Toyota Chairman Akio Toyoda is set to propose 3.7 trillion yen ($26 billion) to acquire Toyota Industries, a producer of forklifts, engines, batteries, and converters, from the public market. Although the agreement was anticipated by many, the cost might be surprising to some. The real estate company, Toyota Fudosan, is proposing 16,300 yen per share - lower than the stock's most recent closing price of 18,400 yen.

Earlier media reports suggested the agreement would probably take place at approximately $42 billion, reflecting a 62% increase over the actual offer price. Individually, Toyota announced its intention to repurchase its shares from Toyota Industries. In recent years, market regulators and investors have increasingly scrutinised Japanese firms regarding their cross-shareholdings in affiliates and business partners, leading to a rise in management buyouts and acquisitions. Numerous transactions have been motivated by the belief that an overhaul in corporate governance will lead to improved returns for shareholders.

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In April, Toyota indicated it was weighing the option of joining a possible acquisition of Toyota Industries - a strategy that sources claimed would enhance the group’s corporate governance. As of September last year, Toyota possessed approximately 24 per cent of Toyota Industries. Toyota Industries owns around 9 per cent of the largest car manufacturer globally and over 5 per cent of Denso, another significant Toyota supplier and group company. Toyota Industries, previously Toyoda Automatic Loom Works, was established in 1926 by Sakichi Toyoda to produce automatic looms. A division focused on automobiles was established within the company and subsequently separated as Toyota Motor.

 ($1 = 142.6500 yen)