Toyota Industries share prices slumped by 12% due to public backlash over perceived discount inaccuracies
Revised Article:
Toyota's Surprising Move Leaves Shareholders Uneasy
In a unexpected turn, Toyota Group dropped a bombshell, announcing plans to privatize Toyota Industries, the manufacturer of looms, forklifts, and automotive parts, for a staggering 4.7 trillion yen ($33 billion), sending its shares plummeting. On June 4, Toyota Industries' shares took a nosedive, plunging by 11.9%, with intraday losses reaching an astonishing 13% - the biggest calamity since August 2024, as reported by Bloomberg.
The details of the offer went public on June 3, with Toyota Fudosan, a development company run by Toyota Motor's chairman Akio Toyoda, set to gobble up Toyota Industries' shares. The arrangement stipulates a share price of 16,300 yen ($113.6), a steep 11% discount from the closing price on the announcement day. This stark contrast has left investors in a lurch, as such acquisition deals usually come with a premium, as pointed out by Yasuo Sakuma, president of Libra Investments.
Insight: The deal's sum of ¥4.7 trillion is substantially lower than Toyota Industries' market capitalization of roughly ¥6 trillion, causing investors to assume that the company is being undervalued, according to Bloomberg.
Shareholders are also questioning whether the offer fairly appraises Toyota Industries' true worth, as its market capitalization is much higher than the tender offer price. In early April, Toyota Industries' shares were trading at around ¥10,765, and they've skyrocketed by over 40% since then. Once the Toyoda company acquires a substantial percentage of Toyota Industries' shares, taking into account other companies' stakes, Toyota Group will own a majority two-thirds, allowing them to commence a squeeze-out of remaining minority shareholders, as reported by Bloomberg.
Insight: The complexity of the transaction and the issuance of non-voting preferred shares to Toyota Motor increase concerns about governance and fair treatment of minority shareholders. Some investors and activist shareholders, such as Zennor Asset Management and Oasis Management, have expressed worries that the buyout price does not appreciate Toyota Industries' substantial real estate holdings adequately, suggesting potential undervaluation.
Toyota seems unmoved by shareholder concerns, signaling that they consider the current company valuation fair, according to Yasuo Sakuma, president of Libra Investments. However, Juliane Burt, an analyst at Pelham Smithers Associates, believes that in light of the market criticism, Toyota Group may reassess the price of the Toyota Industries share buyout.
Insight: The tension largely arises from the perceived undervaluation of Toyota Industries, concerns about minority shareholders being shortchanged, and the empowerment of the Toyoda family's control over Toyota Industries and the broader Toyota Group, raising fears of increased dominance and less shareholder influence.
- The investment decision by Toyota Group to privatize Toyota Industries, a move that comes with a steep discount, has sparked concern in the finance and business industries about the fairness of the valuation and the potential undervaluation of the company.
- The complex transaction involving Toyota Fudosan, a development company owned by Toyota Motor's chairman Akio Toyoda, buying Toyota Industries' shares at a lower price than the market capitalization, has raised questions in the industry about the governance and treatment of minority shareholders in the finance and business sectors.
