(Feb 5): Elliott Investment Management has increased its stake in Toyota Industries Corp again as the activist investor ramps up efforts to block the Toyota group’s bid to take the company private.
The US fund now owns around 7.1% of Toyota Industries, according to a filing on Thursday. Since revealing a 5% stake in November, Elliott has increased its shareholding twice as it rallies investors to push for a better deal.
The latest move, disclosed one week before the tender offer closes, may add to the challenges the Toyota group faces in getting a potential squeeze-out over the line. While Elliott’s campaign has already seen Toyota group sweeten its offer to JPY18,800 — valuing Toyota Industries at JPY6.1 trillion (US$39 billion or $49.43 billion) — it’s still unclear how many of its fellow minority shareholders will join them in opposing a deal that’s become a high-profile test of Japanese corporate governance reforms.
Toyota Industries shares closed at JPY19,255 on Thursday, and have consistently traded above the group’s offer price.
Elliott has previously 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.
The Toyota group’s privatisation bid is set to cost it JPY5.4 trillion, which includes JPY4.3 trillion for the Toyota Industries buyout, and needs two-thirds of voting shares for the tender to succeed. So far, owners of 4.1% of Toyota Industries stock have expressed their intent to tender shares at the below-market offer.
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Should the proposal pass, the company would fall under the control of an unlisted real estate firm called Toyota Fudosan Co. The deal would rank among Japan’s biggest corporate buyouts on record and strengthen the founding family’s grip over the country’s largest business group.
That entanglement underpins ongoing governance flaws despite improved disclosures on financial model assumptions, the Asia Corporate Governance Association (ACGA) said in an open letter published on Thursday.
Toyota’s treatment of group companies as independent minority shareholders also effectively reduces the true threshold for a potential squeeze-out, undermining Japanese guidelines and conduct code protections, it said.
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The take-private bid “continues to lack meaningful transparency around expected synergies or underlying value creation mathematics”, the ACGA said. “Rather, opaque decision-making and the absence of forward-looking disclosures will concentrate all power within an unlisted parent that escapes public scrutiny and accountability.”
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