Toyota has raised its offer price for its supplier to $30 billion, following a win by activist fund Elliott.
Toyota (7203.T) on Monday raised its offer for supplier Toyota Industries (6201.T), ending a months-long debate with activist fund Elliott Investment Management, which had demanded a higher price. Elliott said it would offer its shares in the forklift manufacturer, known as TICO, for $1.5 billion, and described the new offer of 20,600 yen ($132) per share as a better outcome for minority shareholders.
This price is about 10% higher than Toyota’s previous offer of 18,800 yen. The automaker initially offered 16,300 yen per share in June, which was later raised in January, but Elliott had called both offers low. The fund and other minority shareholders said these bid rates undervalued TICO. The clash between Paul Singer’s fund, one of the world’s most influential shareholder activists, and Toyota, the world’s largest automaker, is being seen as a significant example of Japan’s efforts to reform corporate governance.
Travis Lundy of Quidity Advisors, who writes on the Smartkarma platform, said Elliott’s decision to tender makes the deal virtually a done deal, although he described the price as a “disappointing” outcome.
The deal is being seen as a governance improvement in which TICO will sell its stakes in other Toyota companies. This “cross-shareholding” practice has long been criticized because it keeps managers separate from investors. Toyota’s incoming CEO, Kenta Kon, who is seen as the key architect of the buyout, said in a briefing that cross-shareholding has long been an unresolved issue within the Toyota Group, and this represents a significant change for the market. In August, the Asian Corporate Governance Association, along with about two dozen investors, wrote a letter to TICO and Toyota expressing concerns about the buyout. They cited a lack of financial information and suggested that Toyota group companies should not be classified as minority shareholders, as this would reduce the number of votes Toyota needs to finalize the deal. Lundy stated that Toyota never considered the need to reform this structure. The Toyota Group has repeatedly rejected these criticisms, stating that the automaker and other companies have taken several steps to ensure the bid is transparent, including consulting outside directors and obtaining multiple impartial opinions.
Started in 1926 as Toyoda Automatic Loom Works, TICO later added an automobile division, which was spun off as Toyota Motor in 1937. Toyota