Toyota Industries Board to Review USD 42 Bn Buyout Proposal on Tuesday

Key Highlights

Toyota Industries' board is evaluating a ¥6 trillion ($42 billion) buyout offer from a group led by Toyota Motor Chairman Akio Toyoda.
The proposed acquisition seeks to simplify Toyota's complex cross-shareholding structure, aligning with Japan's corporate governance reforms and potentially enhancing operational efficiency.

Toyota Industries Corp. said Tuesday that its board will consider a buyout proposal that would take the company private, bolstering the founding family's control over Japan's largest business empire.

Last month, sources said that a group led by Toyota Motor Corp. Chairman Akio Toyoda is interested in acquiring the subsidiary for ¥6 trillion ($42 billion). Toyota Industries issued a statement on Tuesday in response to reports that the merger would be announced, stating that no specific decisions had been made public.

A deal, which would be one of the largest buyouts in history, would resolve a previously criticized parent-child structure while also aligning with the Japanese government's efforts to encourage big companies to unwind cross-held shares with subsidiaries and other businesses. At the same time, a takeover could give Toyoda more control over the carmaker founded by his grandfather.

"This matter is scheduled to be discussed at its board of directors meeting today, and any decision made will be promptly disclosed," Toyota Industries said in a statement.

According to sources, Toyoda and Toyota Motor will each make a personal investment. Although Akio is the chairman of the world's largest automaker, his direct ownership is less than 1%, while Toyota Industries owns 9.1% of the company.

Toyota Industries shares rose less than 1% in early morning trading in Tokyo on Tuesday. The stock has risen more than 40% since Bloomberg first reported the takeover proposal on April 25.

Toyota Industries, a supplier of textile looms, forklifts, and parts for Toyota vehicles, was founded by Toyoda's great-grandfather Sakichi, whose son Kiichiro went on to found Toyota Motor, the world's largest automaker with annual production of more than 11 million vehicles.

Also Read: Toyota Family Plans Tender Offer for Key Supplier Targeted for November

The parties involved have selected financial advisers and are preparing to make a tender offer as early as November. A special board committee established by Toyoda is evaluating the buyout proposal in accordance with government guidelines.

Toyota Industries will hold its annual shareholder meeting on June 10, while Toyota Motors will do so two days later.

Toyota Group companies have a complex web of cross-shareholdings, with Toyota Motors owning 24.2% of Toyota Industries and Toyota Fudosan Co., a private real estate developer chaired by Toyoda, owning 5.32% of the supplier.

Japan is accelerating efforts to unwind such corporate arrangements in order to improve corporate governance, increase transparency, and boost shareholder returns.

Toyoda's buyout plan comes as Toyota works to rebuild trust in its governance following a series of regulatory scandals at two subsidiaries, including Toyota Industries.