Toyota Industries (6201.T) will be taken private by Toyota Motor (7203.T) in a $33 billion deal, the firms announced Tuesday. This is a historic unwinding of cross-shareholding that is expected to increase the power of the Toyoda family, who founded the company.
Toyota Industries argued that going private will enable it to adopt a longer-term business strategy. In an effort to improve governance, the government is putting more and more pressure on Japanese companies to sell their shares in one another.
Vincent Sun, a senior analyst at Morningstar, stated, “It streamlines the cross-shareholdings a bit within the group,” “We think it makes sense for Toyota Motor to have a stake in Toyota Industries to leverage on any potential autonomous (logistics) technology in the future.”
According to a spokesperson, the entire acquisition cost for the Toyota Group will be approximately 4.7 trillion yen ($33 billion). This includes a $26 billion tender offer for Toyota Industries shares at 16,300 yen each, which is significantly less than the closing price of 18,400 yen on Tuesday prior to the announcement of the agreement.
According to the corporations, a new holding company will be established for the transaction. Toyota Fudosan, a group real estate company, will provide 180 billion yen, while Akio Toyoda, the chairman of Toyota Motor Corporation, will contribute 1 billion yen. 700 billion yen will be invested by Toyota Motor in preferred shares that do not have voting rights.
In order to purchase their own shares currently held by Toyota Industries, Toyota Motor and the group firms Aisin, Denso, and Toyota Tsusho will all sell their shares in the company.
The firms stated that “Toyota Group is focusing on the movement of people, goods, information, and energy as it progresses towards transforming into a mobility company,” while also stating that Toyota Industries would concentrate on logistics.
The price may come as a bit of a shock, even if the trade was anticipated. According to media sources, the tender offer would be approximately $42 billion, which is 62% more than the actual amount.
In April, Toyota said that it was thinking about taking part in a possible takeover of Toyota Industries.
As of September of last year, Toyota owned over 24 percent of Toyota Industries, while the latter owned over 5 percent of Denso and about 9 percent of the largest carmaker in the world.
Sakichi Toyoda established Toyota Industries, originally Toyoda Automatic Loom Works, in 1926 with the goal of producing automatic looms. The business established an automotive division, which subsequently became Toyota Motor.