(Feb 12): The Toyota group extended the tender period for its bid to privatise a key unit, signalling the Japanese conglomerate needs more time to rally shareholder support in the face of an aggressive push by Elliott Investment Management to block the deal.
The new deadline has been pushed back to March 2 from Thursday, and the offer price remains unchanged, according to a filing from the group. Investors holding 33% of Toyota Industries Corp agreed to sell the stock, meaning that coupled with the 25% stake it already has, the Toyota group is about nine percentage points shy of the two-thirds majority it needs to push through the deal.
The extension prolongs Toyota’s high-profile stand-off with Elliott, and means the activist fund still has a chance at derailing what it argues is an undervalued offer for Toyota Industries. While the extra time gives Toyota the opportunity to lobby more investors, it also leaves the door open for the stock to rise further above the offer price — potentially ramping up pressure for an even higher offer to get the proposal over the line.
Toyota’s proposal was contentious from the start, with its initial offer of JPY16,300 ($134.52) per share in June drawing rebukes from investors and analysts who viewed it as an attempt to get them to sell at an undervalued price. Under intensifying pressure from Elliott, the company sweetened the offer to JPY18,800 per share — valuing Toyota Industries at JPY6.1 trillion, but still below its market capitalisation and doing little to appease wary investors.
“The Toyota group are still trying to buy Toyota Industries on the cheap,” said Hugh Sloane of UK-based fund Sloane Robinson. “It means the Toyota group has not succeeded and that the minority share holders are indeed succeeding in getting towards a higher and fair price.”
More time
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Toyota Industries shares reversed losses after the announcement and closed at JPY19,985, up 1.6% on Thursday.
Under the plan, the Toyota group’s privatisation bid would cost it JPY5.4 trillion, including JPY4.3 trillion for the Toyota Industries buyout.
Elliott, the deal’s most vocal critic, at one point suggested a stand-alone plan in which Toyota Industries could achieve a valuation of more than JPY40,000 per share by 2028 by unwinding cross-shareholdings, consolidating, improving capital allocation and implementing governance reforms.
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“Anything that allows Elliott to make more noise gives them a better position, and more time equals more noise,” said Travis Lundy, an independent Japan equity analyst based in Hong Kong. But some investors will be getting impatient, and “extending the deadline lets Toyota group play on that uncertainty,” he said.
Toyota Industries is one of the world’s largest makers of forklifts but was founded by Sakichi Toyoda to commercialise the automated looms he had invented. His son, Kiichiro, went on to create Toyota Motor Corp — now the world’s No 1 carmaker. And Akio, Kiichiro’s grandson, led the automaker as its chief executive officer for 14 years until 2023, when he stepped aside to become the chairman.
As Toyota grew, so did the complexity of the web of cross-shareholdings among group companies. The Japanese government has been pushing firms to unwind such arrangements, with the goal of improving corporate governance, enhancing transparency and boosting shareholder returns.
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