According to media reports, Toyota Motor Corporation has announced that it is evaluating the possibility of acquiring its key parts supplier, Toyota Industries Corporation, in a deal that could be worth as much as $42 billion.
In a filing submitted to the Tokyo Stock Exchange on April 26 following the reports of the potential acquisition, Toyota stated: "We are currently exploring various possibilities, including a partial investment in Toyota Industries."
Bloomberg News previously reported that Toyota Motor's Chairman Akio Toyoda, along with the founding family, proposed the acquisition of Toyota Industries for as much as 6 trillion yen (approximately $42 billion).
According to data from the London Stock Exchange Group (LSEG), this 6 trillion yen offer represents a premium of about 40% compared to Toyota Industries' closing share price as of April 25.
Toyota Industries, which currently has a market value of around 4 trillion yen, stated that it had received a proposal to be privatized via a special purpose vehicle but denied having received any acquisition proposal directly from Toyota's chairman or the Toyota Group.
Sources familiar with the matter revealed that Toyota Industries, which manufactures components for Toyota Motor, has set up a special committee and hired advisors to assess the buyout offer.
Two sources said that Toyota Industries is considering seeking financial backing from Toyota, its group affiliates, and major banks to proceed with the acquisition. They also noted that the proposal did not originate from Akio Toyoda or the Toyota Group.
According to these sources, if Toyota Industries is privatized, it could lead to the unwinding of cross-shareholdings and improve corporate governance within the Toyota Group.
In response to the reports, both Toyota Motor and Toyota Industries stated that no final decisions have been made.
Should the acquisition go through, Akio Toyoda, the third-generation leader of the Toyota family, would gain full control of Toyota Industries. Originally a manufacturer of textile looms founded by Sakichi Toyoda in 1926, Toyota Industries later established an automotive division, which evolved into today's Toyota Motor Corporation, the global leader in vehicle sales. Due to this historical connection, Toyota Industries holds special symbolic significance within the Toyota Group. Today, the company is a major forklift manufacturer, produces the RAV4 SUV for Toyota, and also manufactures engines.
One source indicated that privatization would grant Toyota Industries greater autonomy, allowing it to focus on long-term growth strategies without the pressure of short-term shareholder returns.
Currently, Toyota Industries is facing increasing shareholder pressure to unwind cross-shareholdings in order to improve returns and free up capital for investment.
The company has already sold off some cross-held shares, including stock in another core Toyota Group supplier, Aisin Seiki.
As of September 2024, Toyota Motor holds a 24% stake in Toyota Industries, while Toyota Industries owns 9.07% of Toyota Motor and a 5.41% stake in another key Toyota supplier, Denso Corporation.
