Summary
- Sale could happen as soon as this year, sources say
- Toyota’s governance has been under investor scrutiny
- Toyota’s policy is to cut cross-shareholding arrangements
TOKYO, (Reuters) – Toyota plans a large-scale unwinding of strategic shareholdings that would involve banks and insurance firms selling around $19 billion in shares, two sources said, which could be a turning point in Japan’s efforts at corporate governance reform.
Although the sale will likely total around 3 trillion yen ($19 billion), it could be larger depending on the willingness of shareholders to sell, the sources said.
Toyota, the world’s largest automaker, aims for the sale to happen as early as this year, although the timing and scale could change depending on shareholders – or the plan could be abandoned, one of the sources said.
Reuters is reporting Toyota’s preparations for the first time. Toyota declined to comment. The sources declined to be identified because the information is not public.
It aims to acquire shares through buybacks, the sources said. A secondary sale to other investors has also emerged as an option, another of the sources said.
Toyota’s shares rose and then pared gains to close up 1.5%, outperforming the broader market.
OVERSEAS INVESTORS HAVE CRITICISED CROSS-SHAREHOLDINGS
Regulators and the Tokyo Stock Exchange have been encouraging Japanese companies in recent years to unwind entrenched cross-shareholdings.
The practice, which involves companies holding shares in each other to strengthen business ties, has long been criticised by governance experts and overseas investors as insulating management from shareholders. Although widespread in Japan for decades, it is less common in the West.
Toyota has a policy to cut its cross-shareholdings, but it has also been criticised over governance and some of its investors have called on it to improve capital efficiency.
Toyota wants to demonstrate its seriousness about governance reform by unwinding the strategic shares, one of the sources said.
ACTIVIST INVESTOR ELLIOTT OPPOSES TENDER OFFER
The automaker is in the midst of a tender offer for forklift maker Toyota Industries. Activist investor Elliott opposes the deal, arguing it is underpriced and lacks transparency. Toyota has extended the tender offer to March 2 due to insufficient shareholder support.
Toyota shareholders include banks such as Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group and insurers such as MS&AD Insurance Group.
Japanese banks and insurers have also in recent years outlined policies to reduce their cross-shareholdings.
Reporting by Miho Uranaka and Maki Shiraki; Writing by Sam Nussey; Editing by David Dolan, Christopher Cushing and Barbara Lewis
