Toyota Industries shareholders question buyout at annual meeting
Toyota Industries held what could be its last annual meeting as a public company, after the Toyota group unveiled plans to privatize the maker of forklifts, textile looms and auto parts.
While the ¥4.7 trillion ($32.4 billion) buyout bid by an entity led by Toyota Motor Chairman Akio Toyoda wasn't formally on the agenda Tuesday, it overshadowed the gathering near Nagoya, Japan, as shareholders aired their grievances and sought clarity about the proposal.
The Toyota group's plan to privatize Toyota Industries, the original company that birthed the world's largest carmaker, has drawn sharp criticism from investors and analysts since it was announced a week ago. They argue that the planned tender offer of ¥16,300 per share is too much of a discount on the shares and doesn't represent the intrinsic value of the business.
Koichi Ito, chief executive officer of Toyota Industries, fielded back-to-back questions from shareholders who sought explanations for why the deal was opaque, and why the planned buyout offer fell short of the company's market value.
"Its incredibly unfortunate that Toyota's original business is joining the group and squeezing out its shareholders,' one investor said. Another added, "I don't think I'm alone in feeling the price was low.'
Toyoda will probably face similar questions when Toyota Motor holds it annual meeting later this week.
The privatization of Toyota Industries could resolve a parent-child structure that has been criticized in the past, and is also in line with the Japanese government's push to resolve such relationships. At the same time, a takeover may give Toyoda greater influence over the manufacturing group at a price that risks alienating stakeholders.
"We chose this path as a new step forward for the company,' Ito said at the annual meeting. "We hope to gain everyone's understanding and support.'
All of the company's proposals, including the Toyota Industries board members up for reelection, were approved on Tuesday. The meeting was the longest in its history, and also had the most number of questions by shareholders ever, according to the company.
Toyota Fudosan, which is owned by 15 companies within the Toyota group, will mostly own Toyota Industries via a holding company once the deal is completed. Toyoda, who is also the real estate firm's chairman, will personally invest ¥1 billion into the acquiring entity as well.
"The Toyota group companies wanted to demonstrate to investors that they had been listening to their concerns and were now willing to unwind their cross-shareholdings,' said Julie Boote, an automotive analyst at London-based research firm Pelham Smithers Associates. "This move backfired, because the cross-shareholdings remain in place, indirectly.'
The proposed buyout has drawn more attention to Toyota Fudosan, which itself holds more than ¥1 trillion in shares across the Toyota group.
Toyota Fudosan is known as a real estate company with prominent buildings such as Midland Square, a skyscraper near Toyota Motor's headquarters in the city of Nagoya. Toyoda has been chairman of Toyota Fudosan since 2015, and before that, the position was held by his father, Shoichiro.
The real estate business is effectively acting as a holding company, according to Kenta Kon, a former Toyota Motor chief financial officer who holds key positions at group companies, including Toyota Fudosan.
The planned tender offer for Toyota Industries includes funding from Toyota Motor. The country's top banks — Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group — will also together lend ¥2.8 trillion to the acquisition company to support the buyout.
Toyoda defended the deal in an interview published Friday on the company's media site, pushing back against criticism by investors and analysts who say the terms hand over too much for too little.
The grandson of Toyota Motor's founder denied that the plan was designed to strengthen his family's grip on the business group, and said the real goal is to restore the group's identity and help it overcome seismic changes in the global automobile industry.
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