(Jan 22): Elliott Investment Management disclosed that it now owns more of Toyota Industries Corp, as the activist fund pushes for a better deal in the Toyota group’s bid to take the company private.
The investor now has a 6.7% stake in Toyota Industries, up from 5% in November, according to a filing on Thursday. That makes Elliott the second-biggest shareholder in Toyota Industries, after Toyota Motor Corp and its affiliates.
Elliott’s move could make it more challenging for the Toyota group to convince enough investors to tender their shares and initiate a squeeze out. The activist fund is urging other minority shareholders to resist the proposal and demand a higher offer. The outcome is being closely watched as a test case for whether they can force higher premiums in complex group transactions, where parent companies already hold large stakes and set the terms.
Last week, the Toyota group raised its offer for Toyota Industries, which makes forklifts, textile looms and car parts, to ¥18,800 for each share it didn’t already own, a 15% improvement from its original offer of ¥16,300.
Despite the concession, Elliott opposed the deal, arguing the company has an intrinsic value of ¥25,000 per share, and could achieve greater value on its own. The investor went on to say that it will not tender its shares in Toyota Industries, and urged other minority shareholders to do the same.
The buyout hinges on squeezing out minority investors. The tender offer will need to attract enough minority shareholders to cross a 42% threshold, excluding shares already held by Toyota Motor and treasury stock. That translates into more than 20% of issued stock in Toyota Industries. Once the takeover group secures enough shares, and other Toyota companies tender their stakes, they’ll have a two-thirds super majority — enough to initiate a squeeze out.
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The tender period for Toyota Industries began Jan 15 and will run through Feb 12. If successful, the company will fall under the control of an unlisted real estate company called Toyota Fudosan Co, which is chaired by Akio Toyoda, the leads the board of Toyota Motor Corp and is the grandson of the carmaker’s founder.
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