[TOKYO] Toyota Motor chairman Akio Toyoda has proposed a buyout of supplier Toyota Industries, people familiar with the matter said, seeking to consolidate his grip on Japan’s biggest business empire as a wave of merger and acquisition activity roils the country.
The proposal values Toyota Industries, which makes looms for textile manufacturing as well as parts for Toyota’s cars, at US$42 billion, one of the people said, a premium of 40 per cent over its closing stock price on Friday (Apr 25).
Toyota Industries, the company founded by Toyoda’s great-grandfather Sakichi that ultimately birthed the world’s No 1 carmaker, has formed a special committee after receiving the proposal and hired advisers to review its viability, the people said, asking not to be identified because the information isn’t public.
Although Akio is chairman of Toyota Motor, his direct ownership of the company stands at less than 1 per cent, while Toyota Industries has a 9.1 per cent stake in the carmaker. The buyout would bolster Akio’s stake and influence over the broader Toyota group, which includes suppliers and holdings in other businesses, including rival carmakers.
A deal would rank among the biggest buyouts globally on record. Discussions are still ongoing and the deal may not proceed in its current form, or at all.
Toyota Industries and Toyota Motor did not immediately respond to requests for comment.
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Akio’s buyout proposal comes months after the collapse of a similar bid to take Japanese retailer Seven & i Holdings private. Led by its founding Ito family, that plan’s failure due to lack of funding has raised the chances of a takeover by Canadian rival Alimentation Couche-Tard. The liberalisation of capital flows in the country, along with a push for greater governance and accountability to shareholders, has challenged longstanding ties between management and stakeholders that emphasised stability.
If the bid proceeds, financing will comprise personal investment by Akio Toyoda, along with loans from Mitsubishi UFJ Financial Group and Japan’s other megabanks, said one of the people.
While now smaller and lower-profile than its namesake automobile giant, Toyota Industries has a hallowed position in the company and family’s lore.
Its history goes back 135 years, when Sakichi improved upon loom designs to manufacture textiles, which at the time was an important export for Japan. His son Kiichiro founded Toyota Motor in 1937, which eventually grew to become the largest carmaker in the world with annual production of more than 11 million vehicles.
The two companies are still deeply intertwined. Toyota Motor and its affiliates own about 38 per cent of the shares in Toyota Industries, while Toyota Fudosan, the real estate company that has Akio as its chairman, owns 5 per cent. BLOOMBERG
