Summary
- Bid to now run till March 2
- Shares equivalent to 33.1% of ownership tendered vs the 42% required
- Toyota Industries closes at 19,985 yen per share vs sweetened offer of 18,800 yen
TOKYO, (Reuters) – A Toyota Motor tender offer for Toyota Industries has been extended until March 2 after it appeared to fall short of the necessary shareholder votes in the face of staunch opposition from activist shareholder Elliott Investment.
News of the extension boosted expectations that the offer price will be lifted again, and sent shares in the forklift manufacturer to a record high.
The sweetened tender offer was due to close on Thursday but as of 1.00 p.m. (0400 GMT) – two and half hours before the deadline, over 99 million shares in Toyota Industries had been tendered, equivalent to 33.1% ownership, a filing showed.
For the bid to be successful, 42.01% of shareholders classified as minority owners need to accept the offer. That excludes Toyota Motor’s 24.66% stake.
“I suspect that they will need to increase the offer price again,” said Christopher Richter, auto analyst at CLSA.
A successful buyout would see the automaker’s chairman, Akio Toyoda, strengthen his grip on a key affiliate and by extension the broader Toyota group.
ELLIOTT BUILT UP A LARGE STAKE
Opposition from Elliott, which has built up a 7.1% stake in Toyota Industries to become its biggest minority shareholder, and others has made the deal a test case of governance for Japan’s most storied company as well as Japan Inc as a whole.
It comes amid a years-long push by the government and the Tokyo Stock Exchange for corporate reform that has been regarded as transformational, leading to an influx of foreign investment and boosting mergers and acquisitions.
The bid, which is being led by Toyota Motor, group real estate arm Toyota Fudosan and Toyoda, was hiked by 15% last month to 18,800 yen per share, valuing the company at around $36 billion.
Shares in Toyota Industries finished at 19,985 yen on Thursday, much higher than the 19,400 yen level it was at before the news of the extension and up 1.6% on the day. At one point, the stock hit a lifetime high of 20,010 yen.
Elliott argues the company is worth 26,134 yen per share.
Toyota has defended the offer, saying it reflects Toyota Industries’ intrinsic value and represented a premium to historic market prices.
Toyota Industries has said it took steps to ensure the bid was transparent, including consulting outside directors and independent firms, and received three fairness opinions.
CORPORATE GOVERNANCE CRITICISM
If shares equivalent to 42% ownership are tendered, then the bidders would have enough of a majority to squeeze out other minority shareholders and take the company private.
One part of the controversy surrounding the deal is that the Toyota group has classified parts makers Denso and Aisin and trading company Toyota Tsusho – which own a combined 12.21% of Toyota Industries – as independent minority shareholders.
That has drawn fire, with the Asian Corporate Governance Association advocacy group arguing that this lowers the true independent threshold for a potential squeeze-out.
The association also noted apparent conflicts of interest such as Akio Toyoda serving as chairman of the board for both Toyota Motor and Toyota Fudosan.
Reporting by Daniel Leussink and Anton Bridge; Editing by David Dolan and Edwina Gibbs
