Toyota to take key supplier private in $33bn deal

Toyota Motor will take forklift-maker Toyota Industries private in a $33bn (R590.32bn) deal, the companies said on Tuesday, a landmark unwinding of cross-shareholding likely to strengthen the influence of the group's founding Toyoda family.

Going private will allow Toyota Industries to take a longer-term business perspective, the companies said. Japanese conglomerates are under increasing pressure to unwind stakes in each other as part of a government push for better governance.

“It streamlines the cross-shareholdings a bit within the group,” said Vincent Sun, a senior analyst at Morningstar. “We think it makes sense for Toyota Motor to have a stake in Toyota Industries to leverage on any potential autonomous [logistics] technology in the future.”

The total acquisition cost for the Toyota Group will be about ¥4.7-trillion (R588.27bn), a spokesperson said. That includes a $26bn (R465.22bn) tender offer for shares of Toyota Industries at ¥16,300 (R2,040) apiece, well below the closing price of ¥18,400 (R2,303) on Tuesday before the deal was announced.

A new holding company will be set up for the deal, the companies said. Group real estate company Toyota Fudosan will invest ¥180bn (R22.52bn) while Akio Toyoda, Toyota Motor's chair, will invest ¥1bn (R125.16m). Toyota Motor will invest ¥700bn (R87.6bn) in non-voting preferred shares.

Toyota Motor and group companies Aisin, Denso and Toyota Tsusho will all sell their shares in Toyota Industries and acquire their own shares now held by it.

“Toyota Group is focusing on the movement of people, goods, information and energy as it progresses towards transforming into a mobility company,” the companies said, adding Toyota Industries would focus on the transport of goods.

While the deal was widely expected, the price may come as of a shock. Media reports had indicated the tender offer would be about $42bn (R751.47bn), a 62% premium to the offer.

Toyota said in April it was considering participating in a potential buyout of Toyota Industries.

Toyota owned about 24% of Toyota Industries by September last year, while Toyota Industries held about 9% of the world's biggest carmaker and more than 5% of Denso.

Toyota Industries, formerly Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to make automatic looms. An automotive division in the company was set up and later spun off as Toyota Motor.