Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Toyota has raised its offer to privatise its largest subsidiary, bowing to pressure from activist investors who had pushed for a higher price on a $38bn deal that will reshape Japan’s biggest business empire.
Elliott Management, one of the world’s most prominent activist investors, had waged a months-long battle against the carmaker and its attempt to take Toyota Industries private, accusing the company of underpaying and convincing shareholders not to tender.
On Monday, as the tender deadline approached, Toyota said in a regulatory filing it was willing to increase the amount it would pay by 9.6 per cent, valuing the subsidiary at ¥5.9tn ($37.8bn).
The regulatory filing said Toyota Fudosan, the affiliate leading the take-private, had determined that “obtaining the support of a greater number of shareholders is important for the completion of the tender offer” and that it had entered into an agreement with Elliott to buy all of the activist fund’s shares.
The plans are contingent on Toyota Fudosan securing commitment letters from Japanese lenders to fund a higher bid.
Elliott on Monday said the new price represented “an improved outcome for minority shareholders”.
Toyota unveiled its bid to take Toyota Industries, a key parts supplier and forklift maker, private last June at an offer price of ¥16,300 a share.
The buyout was viewed as key to unwinding one of the group’s biggest crossholdings, an out-of-favour ownership model in which companies own shares in each other and that has been the target of corporate governance reform efforts.
But it also attracted criticism from investors and corporate governance experts for its low offer and opaque valuation methods. After Elliott revealed a stake in Toyota Industries, the conglomerate in January raised its offer to ¥18,800 a share, later saying it was its “best possible price”.
Toyota raising its offer for a second time — to ¥20,600 a share — represents a significant victory for Elliott, which has waged a public and aggressive campaign to stop other shareholders agreeing to the deal. The carmaker was forced to extend a tender deadline last month after failing to win enough support.
The US-based fund had steadily increased its stake in Toyota Industries and owned 7.7 per cent, according to Monday’s regulatory filing. That gives Elliott a roughly $3bn position, based on current market prices.
In its attempt to pressure Toyota, Elliott released a standalone plan for Toyota Industries — a nearly century-old company from which the carmaker was spun out — claiming it could boost longer-term value to more than ¥40,000 a share. The move went further than Elliott’s previous campaigns against SoftBank, Toshiba and Tokyo Gas.
The share price of Toyota Industries, the world’s largest forklift manufacturer, has stayed consistently above the offer level, leaving shareholders with little incentive to tender. Elliott and other activists had also made offers to individual shareholders for their stakes at levels above the offer price.
Other activists and deal advisers in Tokyo said a victory for Elliott would embolden other campaigns and force companies to think harder about the prices they offer for subsidiaries in similar deals.
Shareholders of Toyota Industries will now have until March 16 to decide whether to tender their shares.
