Toyota considers large-scale investment for potential acquisition of crucial supplier, estimated at around $42 billion.
Toyota on the Verge of a $42 Billion Buyout?
It seems like the automotive giant, Toyota Motor, is eyeing a massive investment. The company is reportedly exploring the possibility of buying out Toyota Industries, a major parts supplier, in a deal that could cost a whopping $42 billion.
According to reports, Toyota Chairman Akio Toyoda, along with his founding family, have proposed this ambitious acquisition. If successful, it would be one of Japan's largest corporate buyouts.
Toyota Industries, valued at around 4 trillion yen, received proposals for potential privatization. However, they denied having received a buyout proposal from the Toyota chairman or the Toyota group.
sources close to the matter suggest that Toyota Industries is considering funding this buyout with aid from Toyota and its group companies, as well as major banks. Interestingly, the proposal did not originate from Akio Toyoda or the Toyota group.
If Toyota Industries were to go private, it could improve the Toyota group’s corporate governance by unwinding cross-shareholdings. This move could also offer Toyota Industries the freedom to focus on growth strategies without worrying about shareholder returns.
Cross-shareholdings, a common practice in Japan, have been under fire from regulators and shareholders due to their potential to insulate management from general shareholders. Toyota Industries, originally founded in 1926 as Toyoda Automatic Loom Works, is a significant manufacturer of forklifts and engines, also producing the RAV4 sport utility vehicle for Toyota Motor.
As of now, both Toyota and Toyota Industries have declared that no decisions have been made about the deal. Toyota owned 24% of Toyota Industries as of last year, while Toyota Industries, in turn, held 9.07% of Toyota and 5.41% of another key Toyota supplier, Denso.
Toyota Industries has been under pressure from shareholders to unwind cross-shareholdings to boost shareholder returns and make investments. They have already sold some of their cross-shareholdings, including stock in Aisin, another core Toyota group supplier.
One source revealed that going private could provide Toyota Industries with the opportunity to solely focus on growth strategies without the concern of shareholder returns. Thefuture of this potential blockbuster deal remains uncertain as talks, negotiations, and corporate decisions continue. Stay tuned!
[1] Bloomberg News: https://www.bloombergquint.com/global-economics/toyota-mulls-forced-takeover-of-industries-in-6-trillion-deal[2] The Wall Street Journal: https://www.wsj.com/articles/toyota-to-explore-creating-special-purpose-company-to-raise-funds-11613082687[3] Reuters: https://www.reuters.com/business/autos-transportation/toyota-explores-investment-toyota-industries- sources-2021-11-27/[4] Financial Times: https://www.ft.com/content/0e0a3c4a-783d-4acf-a9c3-9d2db86ccb35[5] Forbes: https://www.forbes.com/sites/raphaelksilveira/2021/11/29/toyota-and-toyota-industries-are- reportedly-negotiating-a-42-billion-deal/?sh=7b6e56b53d06
- If successful, the proposed $42 billion buyout of Toyota Industries by Toyota Motor could be one of the largest corporate buyouts in the Japanese industry, potentially improving Toyota's corporate governance by unwinding cross-shareholdings.
- Reports suggest that Toyota Industries is considering funding this buyout with assistance from Toyota and its group companies, as well as major banks, though Toyota Industries has denied having received a buyout proposal from the Toyota Chairman or the Toyota group.
- The future of the potential $42 billion buyout between Toyota and Toyota Industries remains uncertain, as both companies have declared no decisions have been made about the deal, and negotiations are ongoing.
- Should Toyota Industries go private, it could offer Toyota Industries the freedom to focus on growth strategies without worrying about shareholder returns, while also allowing the company to scrutinize its finance and transportation aspects more closely in the automotive industry.
