Tokyo:
Toyota Motor Corporation is exploring the possibility of investing in a potential buyout of its longtime supplier, Toyota Industries Corporation, in a deal reportedly valued at approximately $42 billion (6 trillion yen). The move could mark a significant shift in Toyota’s corporate structure and governance strategy.
In a filing with the Tokyo Stock Exchange on Saturday, Toyota confirmed that it is examining “various possibilities, including partial investment” following reports about a possible buyout.
The development follows a Bloomberg News report stating that Toyota’s Chairman, Akio Toyoda, along with members of the founding family, have proposed taking Toyota Industries private in a multi-trillion yen deal.
Possible Buyout to Reshape Corporate Governance
Toyota Industries, which currently has a market value of around 4 trillion yen, issued a statement acknowledging that it had received proposals about going private through a special purpose company. However, it denied receiving any formal buyout proposal from Akio Toyoda or Toyota Group leadership.
According to sources familiar with the matter, Toyota Industries is considering reaching out to Toyota, its affiliated companies, and major financial institutions to secure funding for the potential buyout. The sources, who chose to remain anonymous due to the sensitive nature of the discussions, clarified that the idea did not originate from Toyota’s chairman or the automaker itself.
If the buyout materializes, analysts believe it could help improve the group’s corporate governance by unwinding complex cross-shareholdings—an issue that has drawn increasing scrutiny from regulators and shareholders.
Cross-Shareholdings Under Scrutiny
Cross-shareholdings, a practice where companies hold shares in one another, are common in Japan but have come under pressure for shielding management from shareholder accountability. By going private, Toyota Industries would gain greater operational freedom to focus on long-term growth strategies without being constrained by shareholder expectations.
Toyota Industries has already begun reducing some of its cross-shareholdings, recently divesting shares in Aisin, a core Toyota Group supplier, in response to shareholder pressure to improve returns and streamline investments.
As of September last year, Toyota owned approximately 24% of Toyota Industries, while Toyota Industries held a 9.07% stake in Toyota Motor and 5.41% in Denso, another key supplier for the automotive giant.
Historical Ties and Business Operations
Toyota Industries, originally founded in 1926 as Toyoda Automatic Loom Works by Sakichi Toyoda, was the company from which Toyota Motor later emerged. Today, Toyota Industries is a major manufacturer of forklifts, produces engines, and assembles the popular Toyota RAV4 sport utility vehicle for Toyota Motor.
While both Toyota and Toyota Industries stressed that no final decision has been made, the possibility of a buyout has sparked industry-wide speculation about how such a deal could reshape the structure of one of Japan’s largest and most influential corporate groups.
What’s Next?
If successful, the buyout could enable Toyota Industries to shift its focus toward growth initiatives while reinforcing Toyota Motor’s broader efforts to enhance corporate governance and streamline operations across its sprawling network of subsidiaries.
For now, both companies remain in the exploratory phase, with further details expected as discussions progress.
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