Global investors are urging Toyota (TM.US) to provide more information about the proposed acquisition of its subsidiary, Toyota Industries, criticizing the valuation of the transaction as "opaque" and failing to protect minority shareholders' interests. A letter signed by around twenty asset management firms, including AllianceBernstein (AB.US), Lombard Odier, and Schroders, was made public on Thursday, dated August 8. This move could intensify scrutiny of what is viewed as a milestone transaction to eliminate cross-shareholding while potentially reinforcing the Toyota family's influence within the group.
Toyota Industries, a forklift manufacturer and key supplier for Toyota, is set to be privatized by Toyota, the group’s real estate arm Toyota Tsusho, and Toyota Chairman Akio Toyoda. The transaction has garnered close attention due to its implications for the restructuring of Japan's most significant corporate group and comes amid regulators and the government pushing for improved corporate governance. The proposed deal involves a tender offer of ¥16,300 per share, totaling ¥370 billion (approximately $2.45 billion), representing a premium of about 23% over the stock price before the April announcement. Investors pointed out that this premium is significantly lower than the average premium of 44% for similar transactions on the Tokyo Stock Exchange.
The letter warns that the deal could either bolster or undermine progress in corporate governance reforms and demands disclosure of all valuation models, tax assumptions, and third-party assessment reports used to determine the tender offer price. ACGA Secretary General Amar Gill stated that the organization has had multiple discussions with the two companies and arranged for independent directors from Toyota Industries to participate, indicating a level of engagement that is relatively rare.
Toyota, in its statement, mentioned that they have conducted "multiple constructive dialogues" with ACGA and are striving to provide thorough explanations. The company asserted, "This transaction involves negotiations between independent companies and has been conducted through a fair independent process based on principles of good faith, fully considering the interests of minority shareholders. Should there be any need for disclosure in the future, we will announce it promptly."
Notably, Toyota Industries’ share price on Thursday (¥16,620) surpassed the acquisition offer, with the market widely anticipating that Toyota may raise its acquisition price. Investors have also questioned the practice of treating several affiliated companies as independent minority shareholders in this deal, which allows Toyota to secure the transaction with the support of only 42% of minority shareholders, rather than a majority. They are calling for the Toyota board to clarify how it will manage and address potential conflicts of interest between Chairman Akio Toyoda’s direct investments and other shareholders. Toyota indicated that the tender offer, originally scheduled to begin in December, may now be delayed until February or later, as it awaits regulatory approvals in certain jurisdictions.