In today’s Daily news highlights, Toyota Industries’ stock dropped sharply by as much as 13% on Wednesday. This fall is the biggest in 10 months and shows that many investors are not happy about Toyota Group’s plan to take Toyota Industries private with a huge $33 billion buyout deal.
This Breaking News has caught the attention of global markets and sparked discussions about Japan’s business practices, especially related to cross-shareholding.
Why Did Toyota Industries’ Shares Fall?
Here are the main reasons behind the steep fall in the company’s stock:
- Large Buyout Amount:
- Toyota Group plans to buy Toyota Industries for 4.7 trillion yen (about $33 billion).
- Many investors feel the deal is not attractive because the buyout offer is lower than the company’s previous share price.
- The offer price is 16,300 yen per share, but just before the news, Toyota Industries closed at 18,400 yen per share.
- Disapproval from Investors and Experts:
- Experts and analysts said the offer was not fair or appealing.
- A special committee asked Toyota Group three times to increase the offer, but it was rejected each time.
- One analyst, Arun George, mentioned the final offer was even lower than the middle value calculated by independent financial experts.
The Bigger Picture: Japan and Cross-Shareholding
- In Japan, many companies hold shares in each other. This is known as cross-shareholding.
- Toyota has used this system since 2005 to protect itself from being taken over by outside companies.
- But now, Japanese regulators and investors are pressuring companies to stop this old practice.
- Japan’s Financial Services Agency wants firms to reduce these ties to improve transparency.
Kei Okamura, a portfolio manager at Neuberger Berman, said this deal is part of a larger trend. More companies in the Toyota Group may end these cross-shareholding ties in the near future.
How the Deal Will Be Funded
The buyout will be done through a new holding company. Here’s how the deal will be financed:
- Toyota Fudosan (Toyota’s real estate arm) will invest 180 billion yen.
- Akio Toyoda, the chairman of Toyota Motor, will invest 1 billion yen.
- Toyota Motor will invest 700 billion yen in non-voting preferred shares.
- Additional funds will come from big Japanese banks, including:
- Sumitomo Mitsui Banking Corporation
- MUFG Bank
- Mizuho Bank
This financing plan shows how serious Toyota is about gaining full control of Toyota Industries.
Why Is Toyota Industries So Important?
- Toyota Industries actually founded Toyota Motor in 1937.
- Today, it makes forklifts, engines, electronic parts, and metal tools.
- Despite being less famous than Toyota Motor, it plays a key role in the global auto industry.
Toyota Motor had already said in April that it was thinking about investing in a $42 billion buyout of Toyota Industries. The final deal ended up being a bit smaller, but still very large.
What This Means for the Future
Even though many investors are unhappy now, some experts believe this deal will be good in the long run. If Toyota uses the money from ending cross-shareholding to invest in growth, it could lead to better capital returns and a stronger company.
However, the auto industry still faces global challenges. The U.S. announced a 25% tariff on auto imports, and Toyota Motor may be one of the worst hit due to its large presence in the American market.
Daily news highlights will continue to follow this important business story as it develops. This deal not only affects Toyota but may also influence how other big Japanese companies manage their business relationships and investments in the future.
