(Dec 18): Elliott Investment Management has been approaching asset managers and other institutional investors in Japan to build support for its campaign and push Toyota group to sweeten its JPY4.7 trillion (US$30 billion or $38.9 billion) bid to take a key affiliate private, according to people familiar with the matter.
Billionaire Paul Singer’s activist fund, which has quickly built a 5% stake in Toyota Industries Corp, has been meeting with passive investors and other domestic shareholders, and telling them the proposal doesn’t reflect the company’s true value, said the people, who asked not be identified as they were not authorized to speak publicly. The meetings came ahead of a tender offer period set to begin as soon as February.
Toyota Fudosan Co, an unlisted real estate company led by Akio Toyoda, the chairman of group flagship Toyota Motor Corp, is leading the offer to take Toyota Industries private. These manoeuvres set up a rare, high-profile clash between one of Wall Street’s most prominent activist funds and Japan’s corporate establishment.
Elliott’s involvement in what could be one of the world’s biggest buyouts has raised questions about whether the deal will be able to go through as planned. The bid for the company, a maker of looms and forklifts that fathered Toyota Motor, was announced in June but has drawn criticism from investors who say the JPY4.7 trillion price undervalues the company.
Elliott, which has signalled it could raise its stake in Toyota Industries to above 20%, declined to comment, as did Toyota Motor. Toyota Industries said it maintains constructive discussions with all its shareholders but declined to comment on the actions of any specific ones. Toyota Fudosan wasn’t immediately reachable.
The JPY16,300-a-share buyout offer requires about 20% of Toyota Industries shares to be tendered by minority shareholders to go ahead. The stock rose 0.7% in Tokyo on Thursday before paring gains.
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Toyota Industries’ stock price has traded above the offer price since late August, and exceeded it by more than JPY1,500 a share recently, signaling investors are anticipating the offer to be raised. The stock price rising above the Toyota Fudosan bid also lowers the incentive for minority shareholders to tender their shares as they could get more money in the open market.
Elliott’s not alone in voicing concerns about the deal. More than two dozen investors, including a handful based in Japan, sent a letter in August to the boards of Toyota Industries and Toyota Motor that said the deal lacked transparency and hurt minority shareholders.
“It is difficult to ignore the number of shareholders asking these questions, and they are drawn from several different corners of the investment community,” according to an ISS Stoxx GmbH note on Dec 9. “Still, to challenge the Toyota group is to challenge the establishment.”
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Elliott’s chances of extracting concessions from one of Japan’s most powerful companies are better than most. It has just succeeded in a management change at BP plc, and is challenging companies ranging from PepsiCo Inc to Barrick Mining Corp and Rexford Industrial Realty Inc. The firm has also built a stake of more than US$1 billion in Lululemon Athletica Inc, according to a person familiar with the matter.
Toyota Industries was founded by Toyoda’s great-grandfather Sakichi, whose son Kiichiro went on to create Toyota Motor, which makes up the core of Japan’s biggest business group and is the world’s largest automaker. Akio led Toyota as its chief executive officer for 14 years until 2023, when he became the chairman.
Supporters of the tender offer have defended it by saying it represents a premium to the stock price prior to news of the buyout becoming public in late April, when the shares traded at around JPY10,765. Toyota Motor’s CEO, Koji Sato, said in late October that Toyota Fudosan had no plans to sweeten its existing offer.
Elliott is focused on Toyota Industries’ stakes in other companies, people familiar with the matter have said, which are rising in value. It is common in Japan for publicly traded companies to hold stakes in each other, partly to cement business ties. The market value of Toyota Industries’ largest 10 cross-shareholdings has gone up nearly 30% since the take-private offer was announced.
Uploaded by Tham Yek Lee
