Toyota Motor is planning to divest approximately 3 trillion yen ($19 billion) worth of strategic shareholdings it holds in banks and other financial institutions. This move is set to provide a significant boost to Japan's corporate governance reform efforts. If implemented, the plan would signal an acceleration of Toyota's initiative to unwind its cross-shareholdings, a process that began in 2024. This initiative responds to the Japanese government's push for large corporations to simplify their complex shareholding networks, aiming to enhance investor returns and encourage fair competition.
According to unnamed sources familiar with the matter, the final scale of the divestment could be larger, depending on shareholder willingness to sell. Toyota aims to complete the sales as early as this year, although the timing, scale, and even the plan itself are subject to change. A spokesperson for Toyota declined to comment on the report. Following the news, the company's stock experienced a brief rally before paring some of its gains. In after-hours trading, the stock was up 0.17% at $242.13.
Senior auto analyst Tatsuo Yoshida highlighted a key consideration: "The crucial point is whether Toyota will retain the repurchased shares as treasury stock without canceling them, or if it will actually reduce the number of outstanding shares through cancellation." He noted that how Toyota utilizes the repurchased shares is of greater importance. Previous reports indicated that Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group plan to reduce their combined 1.32 trillion yen in strategic holdings in Toyota.
Kazuhiro Sasaki, Head of Research at Phillip Securities Japan, viewed the news positively from a corporate governance perspective. He pointed out that financial institutions acting as cross-shareholders is not considered good governance practice. Toyota's plan coincides with Japan's scheduled revision of its Corporate Governance Code this year, suggesting it aligns well with this favorable trend.
However, the overall pace of reform within Japan's corporate sector has been slow. Toyota's own reform efforts have drawn attention through its move to take a key subsidiary private. The group's attempt to acquire Toyota Industries has faced strong criticism from activist investor Elliott Investment Management, which is urging investors to collectively block the takeover bid. This privatization effort, led by Toyota Chairman Akio Toyoda, will see its tender offer period conclude on Monday. Earlier this month, Toyota Industries stated that the Toyota group was still approximately 9% short of securing the two-thirds majority required to initiate a squeeze-out acquisition.
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