Toyota wants to buy out key supplier for $42bn - media outlet
Toyota Motor said it is exploring a potential buyout of its key automotive parts supplier Toyota Industries. According to Reuters, the deal could be worth about 6 trillion yen (about $42bn).
Here's What We Know
Earlier, Bloomberg News reported that Toyota Chairman Akio Toyoda and the family of the company's founder have offered to buy out Toyota Industries.
The market value of Toyota Industries is estimated at about 4 trillion yen. The company confirmed that it has received offers to go private through a special purpose company (SPC), but denied that the offer came from Akio Toyoda or the Toyota group.
Two sources familiar with the situation said Toyota Industries is considering raising funds for the buyout from Toyota itself, its affiliates as well as major banks. They also confirmed that the initiative did not come personally from Akio Toyoda or the Toyota group.
The sources said that if Toyota Industries were to leave the stock exchange, it would improve corporate governance in the Toyota group by reducing cross-shareholdings. The practice of cross-shareholding, where companies hold stakes in each other, is common in Japan but has been increasingly criticised by regulators and investors in recent years as it is seen as reducing management's responsibility to ordinary shareholders.
As of September last year, Toyota held a 24 per cent stake in Toyota Industries, while Toyota Industries itself held a 9.07 per cent stake in Toyota and a 5.41 per cent stake in Denso, another key supplier to the auto giant.
In recent years, Toyota Industries has come under increased pressure from shareholders to reduce cross-shareholdings in order to increase payouts to shareholders and free up funds for investment. The company has already sold some of its stakes, including in Aisin, another important Toyota supplier.
Both Toyota Motor and Toyota Industries emphasised in their statements that no final decisions have been made at the moment.
Toyota Industries, formerly known as Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to produce automatic weaving machines. It later created an automobile division, which was later spun off into a separate company, Toyota Motor.
Source: Reuters
