Akio Toyoda is splurging $33 billion to acquire Toyota Industries.
The proposed buyout of Toyota Industries, a key player in sectors such as materials handling, automotive components, and advanced logistics technology, is causing a stir in the business world. The deal, valued at approximately 4.7 trillion yen ($33 billion to $44 billion), is being spearheaded by Toyota Fudosan and Toyota Motor Corporation, with Akio Toyoda playing a significant role.
The announcement of the deal has led to a drop in Toyota Industries' share price by around 12.5%, indicating market disappointment and concerns about the deal's valuation. Some investors argue that the transaction structure and pricing may potentially undervalue Toyota Industries, a concern that is further fueled by the fact that the offer price includes a premium over the company's stock price before the deal became public.
This buyout is part of the Toyota Group's strategic effort to simplify its complex cross-shareholding structure among related companies like Aisin, Denso, and Toyota Tsusho. Japanese regulators have been encouraging conglomerates to reduce cross-shareholdings to enhance corporate governance transparency and accountability. As such, the restructuring seems to be a response partly to regulatory and investor pressure.
However, the deal has sparked concerns about the implications for minority shareholders and corporate governance practices in Japan's traditionally cross-held corporate groups. Critics argue that the consolidation under a new holding company controlled in part by Toyota Fudosan with contributions from Akio Toyoda and Toyota Motor reflects a desire to strengthen strategic alignment and control rather than maximize shareholder value in an open market.
Notable critics include David Mitchinson, director of investments at Zennor Asset Management, who is a shareholder of Toyota Industries and has expressed concerns about the company's corporate governance in relation to the deal. Masatoshi Kikuchi, chief equity strategist at Mizuho Securities, has also noted that such a discount is disheartening and traditionally opposed by activist investors.
It's important to note that the deal, as reported by Bloomberg, has not been finalized. Akio Toyoda has invested 1 billion yen into the new holding company, and the deal will involve Toyota Motor investing 1 trillion yen in Toyota Industries, bringing the total deal value to 4.7 trillion yen. The shares of Toyota Industries are expected to be sold at a price of 16,300 yen, and the new holding company will serve as an investment vehicle for the Toyoda family.
In conclusion, while the buyout aims to improve long-term operational integration within the Toyota Group and comply with governance reforms, it has sparked concerns about undervaluation and the implications for minority shareholders and corporate governance practices in Japan's traditionally cross-held corporate groups. The deal's success will depend on how it addresses these concerns effectively.
[1] Bloomberg, May 2023 [5] Nikkei Asian Review, May 2023 [5] Kyodo News, May 2023
Investors are deliberating whether the proposed buyout of Toyota Industries, with a value of approximately 4.7 trillion yen, is an appropriate valuation, given potential undervaluation concerns. The deal, partly spearheaded by Akio Toyoda, could lead to the creation of a new finance vehicle for the Toyoda family.
