Toyota Motor Corporation shares dropped by roughly 13% Wednesday after Toyota Group reported a 4.7 trillion yen ($33 billion) deal to take the company private. The deal, led by Akio Toyoda, includes a tender offer of $26 billion for shares of Toyota Industries at 16,300 yen apiece.
The proposed tender was lower than the 18,400 yen the company closed on Tuesday before the deal was announced. Satory Aoyama, head of corporate rating at Fitch Ratings in Japan, said Toyota employed cross-shareholding back in 2005 to protect itself against acquisition threats.
Toyota Motor Corporation buyout deal disappoints shareholders
Toyota Industries received a $33 billion offer to go private, potentially tightening the founding family’s control. The deal will involve a tender offer for the shares of the supplier of textile looms, forklifts, and parts for Toyota Motor Corp.’s cars for ¥16,300 a share. — OutSmarting Markets (@itradeph) June 3, 2025
Toyota Industries revealed it will be privatized for 4.7 trillion yen by a group led by Akio Toyoda – a move that could hand the company a stronger hold on Japan’s biggest business empire for significantly less than its current market value. Investors seemed disappointed over the company’s deal, which was reflected in the 13% drop in Toyota Industries’ shares on June 4.
The deal’s announcement came at a time when Japanese firms are facing mounting pressure from regulators and investors to unwind long-established cross-shareholding ties. The country’s Financial Services Agency has also been championing a reduction in cross-shareholding arrangements. Toyota mentioned in April that it was exploring investing in a potential $42 billion buyout of Toyota Industries.
“Going forward, there will be more of these unwinding of cross shareholdings amongst the Toyota Group. “ -Kei Okamura, Managing Director and Japanese Portfolio Manager at Neuberger Berman.
Toyota revealed that it will create a new holding company for the deal, with the group’s real estate arm, Toyota Fudosan, investing about 180 billion yen. Toyota Motor will invest about 700 billion yen in non-voting preferred shares, while Toyota Motor Chairman Akio Toyoda will invest 1 billion yen. The car company also noted that other financing will be backed by loans from Sumitomo Mitsui Banking Corporation, MUFG Bank, and Mizuho Bank.
The takeover may give Toyoda greater influence over the venerable automaker founded by his grandfather, Sakichi. Chief equity strategist at Mizuho Securities argued that paying a premium is standard practice, but a discount “leaves a bitter taste.” He also noted that activist investors historically oppose discounted tender offers.
Concerns rise regarding the deal’s offer price
Toyota, the world's largest automaker, is sick … very sick. Toyota struggles to generate continuously positive free cash flows making its stock 4.4x more expensive than Tesla's stock on a historical free cash flow yield basis! — AJ (@alojoh) September 28, 2023
Global equity research analyst Arun George argued that some factors suggest the offer is “unattractive.” He noted that the offer price was below the midpoint of the valuation range the commissioned independent financial advisers gave. According to him, the special committee requested that Toyota Industries improve its JPY16,300 final offer three times, but it was rejected.
Kenta Kon, former Toyota Motor’s chief financial officer, said the chairman’s involvement isn’t about control over the business but about his commitment to the deal, to provide support on the ground and to the betterment of Japan. He also denied that the privatization was a management buyout led by Toyoda.
When Kon was asked whether there were any concerns that the proposal was below Toyota Industries’ current market value, he said the tender offer price represented a significant premium to the firm’s shares before the news of the buyout became public in late April. He believes it won’t satisfy some shareholders, with the stock increasing more than 40% since then.
David Mitchinson, chief investment officer at Zennor Asset Management LLP, which owns shares in Toyota Industries, argued that the tender offer price was low compared to their estimates of intrinsic value. He also highlighted that the deal was for the Toyota group and not one for Toyota Industries shareholders.
Toyota Industries is expected to hold its annual shareholder meeting on June 10, while Toyota Motor’s will take place two days later. The deal also comes as Toyota seeks to rebuild trust in its governance after many regulatory scandals were revealed at a pair of subsidiaries that included Toyota Industries.
According to the statement, Toyota Motor and its suppliers Denso Corp., Aisin Corp., and Toyota Tsusho Corp. will sell their stock in Toyota Industries and acquire their own shares held by Toyota Industries. The statement also revealed the sale would dissolve the cross-shareholding between Toyota Industries and those four companies. However, Toyota Motor Company will continue to invest in Toyota Industries through preferred shares.
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