Toyota bumped its offer price for supplier Toyota Industries on Monday, valuing the bid at $30 billion and ending a months-long battle with activist fund Elliott Investment Management, which had pushed for a higher price.
Elliott said it had agreed to tender its shares in the forklift maker, known as TICO, and called the raised offer of 20,600 yen ($132) a share an “improved outcome” for minority shareholders.
The price is nearly 10% above Toyota’s previous bid of 18,800 yen.
The automaker originally offered 16,300 yen a share in June before raising it in January. Elliott had rejected both offers as too low.
The fund, and other minority shareholders said those bids undervalued TICO.
The stand-off between Paul Singer’s fund – one of the world’s most prominent shareholder activists – and Toyota, the world’s top-selling automaker, has been closely watched as a test case for Japan’s push to improve corporate governance.
Elliott’s decision to tender effectively makes the bid a “done deal”, said Travis Lundy of Quiddity Advisors, who publishes on the Smartkarma platform, though he called the higher price a “disappointing outcome.”
Elliott had previously said the shares were worth more than 26,000 yen each.
TEST CASE FOR GOVERNANCE
As part of the deal, TICO will unwind its holdings in other Toyota companies. That practice of “cross-shareholding” has long been criticised as insulating management from investors.
“Cross-shareholdings have long been an unresolved issue within the Toyota Group, and this is an extremely significant development for the market,” Toyota’s incoming CEO Kenta Kon, who is seen as the architect of the buyout, told a briefing.
In August, the Asian Corporate Governance Association advocacy group, together with some two dozen investors, raised concerns about the buyout in a letter to TICO and Toyota.
They cited inadequate financial disclosure and said Toyota group companies shouldn’t be classified as minority shareholders, as that lowers the voting threshold Toyota would need to clinch the deal.
“At no time did Toyota ever admit that the structure was designed in a way which might have been done better,” Lundy said.
The Toyota group has repeatedly rejected such criticism, saying the automaker and other involved companies have taken multiple steps to ensure the bid was transparent, including consulting with outside directors and receiving three fairness opinions.
Founded in 1926 as Toyoda Automatic Loom Works, TICO later added an automobile division, spun off as Toyota Motor in 1937. Toyota has said it wants to take TICO private to remove the burden of short-term profit targets as the group pivots to connected cars and advanced software.
Reuters previously detailed how overseas investors, alarmed by what they saw as opaque financial disclosure and shoddy treatment of minority shareholders, complained to the Tokyo Stock Exchange (TSE) over the summer that the transaction went against its drive to improve governance. Reuters reported last week that Elliott was wooing shareholders who had already agreed to tender their shares to Toyota, complicating Toyota’s efforts.
The Japanese group said its latest offer price is dependent upon obtaining loan guarantees from its banks.
The increased price values the offer at 4.7 trillion yen ($30 billion).
($1 = 156.7200 yen)
Reuters
