Shares of Toyota Industries Corp. surged to their daily limit, climbing 23% on Monday, as investors eagerly responded to the news of a potential buyout proposal from Akio Toyoda, Chairman of Toyota Motor Corp. The buyout, which is seen as a move to strengthen Toyoda’s control over the sprawling Toyota Group, has sparked a debate over the future of corporate governance at one of Japan’s largest business conglomerates.
The surge in Toyota Industries stock followed reports that the company had formed a special committee and hired advisers to review Toyoda’s buyout proposal. Despite limited trading during the day, with bids to purchase the stock outnumbering offers to sell, the value of Toyota Motor shares also rose by 5.2%.
The proposed buyout values Toyota Industries, which manufactures textile looms and automotive components, at ¥6 trillion ($42 billion). This represents a roughly 40% premium over its market capitalization at the close of trading on Friday, making it one of the largest proposed buyouts in global corporate history.
The move comes amid increasing calls from investors in Japan for enhanced corporate governance and higher returns. While Toyota Industries has been selling off cross-shareholdings and distancing itself from subsidiaries, analysts suggest that Toyoda’s bid might be a reversal of these efforts, potentially undermining governance reforms.
Norikazu Shimizu, an analyst at IwaiCosmo Securities Co., expressed concerns, stating that the buyout could lead to shareholder opposition, as it would consolidate power within Toyota’s founding family. Kazunori Maki, an analyst at SMBC Nikko Securities Inc., noted that the deal might also make it more difficult for both Toyota Industries and Toyota Motor to achieve improved returns on equity.
Despite these concerns, investors have reacted positively, betting on the potential for a significant premium in the event of a buyout. Tatsuo Yoshida, an analyst at Bloomberg Intelligence, suggested that increased control for the Toyoda family could ultimately benefit Toyota Motor shareholders, particularly in the long term. He also pointed to Toyota Industries’ industrial vehicle business as a promising source of profitability.
Macquarie analyst James Hong weighed in, describing the buyout as another indication that Toyota Group is making strides in improving corporate governance, a move that could have positive effects across its various entities.
Toyota Motor, which holds a 9.1% stake in Toyota Industries, has yet to make a decision on the proposal. A spokesperson for the company confirmed on Friday that it is exploring various options, including a partial investment in Toyota Industries.
In addition to the buyout news, Toyota Motor’s shares are benefiting from positive expectations ahead of the company’s upcoming earnings announcement. Eiji Kinouchi, Chief Technical Analyst at Daiwa Securities, noted that the automaker is likely to report a strong profit increase before any impact from tariffs, with the potential for government measures to bolster domestic auto demand.
Though Akio Toyoda holds less than 1% of Toyota Industries, the buyout proposal would significantly increase his influence over the broader Toyota Group, which includes key suppliers and stakes in other major automotive companies. However, Toyoda’s approval rating among shareholders has been on the decline in recent years, falling from 96% three years ago to 72% today, as concerns have emerged over the company’s handling of the shift toward electric vehicles and safety certification issues.
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