In a strategic move to potentially invest in a significant buyout, Toyota Motor is currently exploring options concerning key parts supplier Toyota Industries. Reports of a possible $42 billion buyout have surfaced, sparking discussions within the industry.
The buyout proposition, reportedly initiated by Toyota Chairman Akio Toyoda and the founder family, suggests acquiring Toyota Industries in a deal valued at 6 trillion yen. Toyota Industries, with a market value of 4 trillion yen, has acknowledged receiving proposals for privatization through a special purpose company. However, the company denied receiving a direct buyout proposal from the Toyota chairman or the Toyota group.
Sources familiar with the matter revealed that Toyota Industries is contemplating leveraging funds from Toyota and its group companies, along with major banks, to facilitate the buyout process. The move could potentially enhance the Toyota group's corporate governance by unwinding cross-shareholdings, ultimately boosting shareholder returns and enabling strategic investments.
While both Toyota and Toyota Industries emphasized that no final decisions have been made, the prospect of Toyota Industries going private could offer the company the flexibility to focus on growth initiatives without the constraints of shareholder returns. This move aligns with a broader trend of unwinding cross shareholdings in Japan, as shareholders and regulators increasingly scrutinize the practice for potentially limiting management responsiveness to general shareholders' interests.
Originally founded in 1926 by Sakichi Toyoda to manufacture automatic looms, Toyota Industries has since evolved into a major manufacturer of forklifts and plays a crucial role in producing the RAV4 SUV for Toyota Motor, as well as engines. The progression towards a potential buyout represents a significant development that could reshape the dynamics of the automotive industry and enhance the competitive landscape for both Toyota Motor and Toyota Industries.