David Dolan and Rocky Swift
TOKYO (Reuters) - Investors praised Toyota Motor's $33 billion private offer on Wednesday, highlighting concerns that minority shareholders will change briefly in the restructuring of the Japanese company's landmark.
Stocks of Toyota Industries, the important Toyota Group Company, fell 12% in Tokyo trade in the unveiling plan of the world's best-selling automakers in private units. The complex's 47 trillion yen (US$33 billion) transaction includes a quotation price of 16,300 yen per share by Toyota Industries.
While this represents a 23% premium on the price before the April traded fare, it was well below the 18,400 yen price before the formal announcement of the offer. Stocks closed on Wednesday at 16,205 yen.
"To be clear, we welcome trying to clear the governance issues of parental nurturing. We don't like the price," said David Mitchinson, founding partner and chief investment officer of Zennor Asset Management, which owns Toyota Industries stock.
Asked if Zennor would attract its shares, he said: "With a strong backlash from many shareholders, we will have to see how it develops."
The agreement will allow many Toyota Group companies to relax cross-equity, with Japanese regulators and the Tokyo Stock Exchange long urging higher governance.
Toyota Industries has always been one of the most famous examples of Japan's most famous "parent-child list" with a list of parent companies and their subsidiaries. Governance experts say such cases are inherently unfair to minority shareholders and drag down the value of the company.
Still, the deal was not enough to make corporate governance underestimate Toyota Industries’ substantial real estate holdings and strengthen the control of the founding Toyoda family over the wider group, market participants said.
"The land and other holdings in the Toyota industry are high and the prices should be much higher," Nicholas Benes, CEO of Japan's Japan Board Training Academy, said in a briefing Wednesday.
The deal, he said, is a "primary example" of founders and management squeezing out minority shareholders at unfair prices.
Toyota Motor said in a statement that it is considering the interests of Toyota Industrial's minority shareholders. “We adopted a stock buyback program through the tender offer considering shareholder returns and tax benefits in the Toyota industry,” it said.
It said the deal is part of a broader readjustment of the internal capital structure of Toyota Group as it is heading to become a mobility company.
A new holding company will be established. Group real estate company Toyota Fudosan will invest 180 billion yen, while Toyota Motor Chairman Akio Toyoda will invest 1 billion yen. Toyota will invest 700 billion yen in non-voting preferred stocks.
Media reports show that the tender offer is about $42 billion, which is a considerable premium for the actual offer.
Toyota Motor Corporation and group companies Aisin, Denso and Toyota Tsusho will all sell their shares in the Toyota industry and acquire their own shares from their own shares held by IT.
As of September last year, Toyota owned about 24% of the Toyota industry, while Toyota Industries owned about 9% of the automakers, accounting for more than 5% of Denso.
Toyota Industries (formerly Toyoda Automatic Loom Works) was founded in 1926 to manufacture automatic looms. The company's internal automotive department was established, and later it was revolved with Toyota.
(Reported by David Dolan and Rocky Swift. Editors by Stephen Coates and Mark Potter)