Toyota mulls $65b buyout of supplier
Make us a preferred source
Make us a preferred source on Google
The news: Toyota is considering investing in a buyout of a key parts supplier, Toyota Industries, according to a filing to the Tokyo Stock Exchange on Sunday.
The numbers: On Friday Bloomberg reported that the buyout of Toyota Industries could cost up to 6 trillion yen ($65 billion), a roughly 40% premium over its market capitalisation at Friday’s close.
Toyota owned 24% of Toyota Industries as of September last year, while Toyota Industries held 9.07% of Toyota and 5.41% of Denso, another key Toyota supplier.
The context: While Toyota Industries said it had received proposals about going private through a special purpose company, it denied having received a buyout proposal from the Toyota chairman or the Toyota group.
While statements filed with the Tokyo exchange on Sunday from both companies said that nothing has been decided, Toyota confirmed “We are currently exploring various possibilities, including partial investment.”
According to sources cited by Reuters, if Toyota Industries were to go private, it would help improve the Toyota group's corporate governance as cross-shareholdings would be unwound.
The sources added that Toyota Industries is considering tapping major banks (as well as Toyota) to fund a buyout and that the proposal did not come from Akio Toyoda or the Toyota group.
What they said: Following Bloomberg’s report, Masahiro Akita, a Tokyo-based equity analyst at Bernstein, said: “While we have seen the unwinding of cross-shareholdings within the Toyota group over the past two years, we have been focusing on Toyota Industries as the ‘final boss’ of corporate governance reforms…Increasing regulatory and market focus on corporate governance should trigger a realignment of the parent-subsidiary listing structure, including Toyota and Toyota Industries.”
