Elliott Investment Management has rejected the Toyota Group's increased takeover offer to privatize its core subsidiary, Toyota Industries, with the activist fund calling on other shareholders to veto the proposal and push for a better bid.
Facing pressure from a group of determined minority shareholders of Toyota Industries, the Toyota Group had previously raised its acquisition offer to ¥18,800 per share (approximately $118.50), a 15% increase from the original bid. However, on Thursday, Toyota Industries' stock price surged as much as 6.8%, reaching ¥19,255 per share, a movement that bolstered the case for some investors demanding a higher premium.
As the primary opponent of this privatization proposal, the Elliott Fund issued a statement on Thursday declaring that the new tender offer price still "severely" undervalues Toyota Industries and does not serve the best interests of minority shareholders. The US activist fund asserted that a fair share price for Toyota Industries should be no less than ¥25,000 per share.
The statement noted, "Based on the current transaction terms, Elliott has no intention of tendering its shares and will encourage other shareholders not to support this tender offer."
UK fund firm Silchester International Investors, which also holds a stake in Toyota Industries, similarly advocates for an acquisition price of ¥25,000 per share.
Stephen Silchester of Silchester stated, "The Toyota Group is attempting to acquire Toyota Industries at a low price. This move may prompt more activist investors to step in and push for a renegotiation of the deal."
The protest action continues to gain momentum.
The tender offer officially commenced on Thursday and will remain open until February 12. The final outcome of this transaction could have profound implications for future waves of privatization acquisitions within the Japanese corporate sector. If the acquisition is successful, this company, primarily engaged in textile machinery and forklift manufacturing, will fall under the control of Toyota Fudosan Co. Toyota Fudosan is an unlisted real estate company whose chairman is Akio Toyoda, the Chairman of the Board of Toyota Motor Corporation; Akio Toyoda is also the grandson of Toyota's founder.
The acquisition offer was originally scheduled to launch in December of last year but was delayed due to prolonged antitrust regulatory approval processes in several countries.
When the Toyota Group first announced the take-private offer for Toyota Industries in June last year, the deal was valued at approximately ¥4.7 trillion, representing an 11% discount to Toyota Industries' market capitalization at the time. The announcement immediately sparked controversy, with critics demanding greater transparency—on one hand, the deal would further consolidate the control of Toyota's founding family over Japan's largest industrial group; on the other hand, its scale places it among the largest acquisition deals in global history.
In November last year, Elliott Fund disclosed that it had acquired a 5% stake in Toyota Industries, injecting significant momentum into the protest movement. Within weeks, the fund had begun contacting other domestic Japanese shareholders to seek support in opposing the acquisition.
Elliott Fund has been actively working to build market consensus that Toyota Industries deserves a higher acquisition premium, partly because the company holds shares in other businesses valued at approximately ¥6.1 trillion, with these holdings concentrated mainly within Toyota Group companies.
Stephen Codrington, CEO of the independent research firm Codrington Japan, said, "This increased offer is, in fact, even less reasonable than the initial one. It's important to note that compared to June last year, the value of Toyota Industries' equity holdings in group companies has increased by ¥5,300 per share."
Kenta Kon, the Chief Financial Officer of Toyota Motor Corporation, who also holds key positions in several group subsidiaries including Toyota Fudosan, told reporters on Wednesday that the increased offer more fully reflects Toyota Industries' potential value and should alleviate market concerns.
It remains uncertain whether a sufficient number of minority shareholders are willing to accept this offer and facilitate the deal's completion. Electronic manufacturer Ibiden Co., Ltd. announced on Thursday its plan to sell Toyota Industries shares worth approximately $328 million.
However, some observers believe that a higher offer might be necessary for the Toyota Group to successfully complete this acquisition.
Julie Boote, an analyst at London-based research firm Pelham Smithers Associates Ltd., said, "Even with the increased offer, a gap remains between the bid and a fair valuation for Toyota Industries. The only plausible explanation for the rising stock price now is that the market views it as a conciliatory signal from the Toyota Group to minority shareholders."
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