Toyota Considers Major Investment in Toyota Industries: A Potential $42 Billion Buyout in the Works?

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

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Image Source: REUTERS/David 'Dee' Delgado

Toyota Motor Corporation (7203.T) announced on Saturday that it is exploring the possibility of investing in a potential buyout of its key parts supplier, Toyota Industries Corporation (6201.T). The move, which could involve a transaction valued at approximately $42 billion, would mark one of the largest corporate deals in Japan’s history.

In a filing with the Tokyo Stock Exchange, Toyota confirmed, "We are currently exploring various possibilities, including partial investment," following reports suggesting a potential full acquisition.

Background of the Buyout Speculation

Bloomberg News initially reported on Friday that Toyota’s Chairman, Akio Toyoda, along with members of the founding Toyoda family, had proposed acquiring Toyota Industries through a special purpose vehicle, in a deal estimated at around 6 trillion yen ($42 billion). However, Toyota Industries, valued at roughly 4 trillion yen, clarified that while it had received proposals regarding going private, no official buyout offer had been submitted by Akio Toyoda or the Toyota Group.

Sources close to the matter indicated that Toyota Industries is considering financing options involving Toyota, its group companies, and major Japanese banks. These discussions, however, remain confidential, and both Toyota and Toyota Industries emphasized that no final decisions have been made.

Why a Buyout is Under Consideration

If completed, taking Toyota Industries private would mark a strategic shift. The move is seen as a way to strengthen corporate governance within the Toyota Group by unwinding complex cross-shareholdings where companies own stakes in each other a practice long scrutinized by regulators and investors for potentially shielding management from broader shareholder accountability.

Currently, Toyota Motor owns approximately 24% of Toyota Industries. In turn, Toyota Industries holds about 9.07% of Toyota and 5.41% of Denso Corporation (6902.T), another critical supplier for Toyota.

Shareholder pressure on Toyota Industries has been growing to dismantle these cross-shareholdings to enhance transparency, boost shareholder returns, and allow greater focus on core business growth. In response, Toyota Industries has already begun selling shares in companies like Aisin Corporation (7259.T), another member of the Toyota Group.

Strategic Implications

Going private could offer Toyota Industries significant strategic flexibility, enabling the company to pursue long-term growth initiatives without the immediate pressures of meeting public shareholder expectations.

As one source familiar with the discussions noted, “Privatization would allow Toyota Industries to prioritize investments and innovation strategies more freely, aligning more closely with the overall vision of the Toyota Group.”

Legacy and Importance of Toyota Industries

Founded in 1926 by Sakichi Toyoda as Toyoda Automatic Loom Works, Toyota Industries has deep roots in the Toyota Group. Originally a manufacturer of automatic looms, it later gave birth to Toyota Motor Corporation, now one of the world's largest automakers. Today, Toyota Industries remains a crucial player, manufacturing forklifts, engines, and producing vehicles like the RAV4 sport utility vehicle (SUV) for Toyota.

What's Next?

At this stage, discussions remain preliminary. Both Toyota Motor and Toyota Industries have reiterated that no definitive course of action has been decided. Investors and industry analysts will be closely monitoring developments, given the potential impact such a move could have on Japan’s corporate landscape and the global automotive supply chain.