[TOKYO] Global investors have called on Toyota Motor to provide more disclosure about its planned buyout of group firm Toyota Industries, criticising what they said was “opaque” valuation and a failure to safeguard the interests of minority shareholders.
An Aug 8 letter from some two dozen asset managers, which was made public on Thursday (Oct 16), is likely to deepen scrutiny of the deal. Those who signed the letter were managers from firms such as AllianceBernstein, Neuberger Berman and Schroders.
It promises a landmark unwinding of cross-shareholdings, and to strengthen the influence of the founding Toyoda family within the group.
The transaction is being closely watched as it involves an overhaul of the country’s most important corporate group, and coincides with a push by regulators and the government for better corporate governance.
Toyota Industries, a maker of forklifts and a key supplier to the Japanese automaker, is to be taken private by Toyota, group real estate company Toyota Fudosan, and Toyota chairman Akio Toyoda.
Premium seen as below average
The proposed transaction includes a 3.7 billion yen (S$31.7 million) tender offer for shares of Toyota Industries at 16,300 yen apiece, which represents around a 23 per cent premium to the share price before word of the deal broke in April.
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That is well below the 44 per cent average premium in similar deals based on Tokyo Stock Exchange data, the investors said.
The deal has the potential to “either reinforce or weaken the progress made in corporate governance reforms”, the investors said in the letter.
It was sent by the Asian Corporate Governance Association (ACGA), which represents asset managers in the region, and was signed by global institutional investors.
“Central to our concerns is the lack of full valuation disclosure,” the investors said. They called for the release of all valuation models, tax assumptions and third-party appraisals used to determine the offer price.
ACGA has had a series of calls with both companies about the deal, and a Toyota Industries independent director was made available for discussion. This provided a level of access that is relatively rare, ACGA secretary-general Amar Gill told Reuters.
Toyota Industries shares above offer price
The company said in a statement that it had engaged in “multiple rounds of constructive dialogue” with ACGA, and has sought to provide thorough explanations of its position.
“The negotiations between the independent companies involved in this transaction have been conducted in good faith, through a fair and independent process, with sufficient consideration given to the interests of minority shareholders,” it said.
“Should there be any matters that require disclosure in the future, we will promptly make such announcements.”
Shares of Toyota Industries have been trading above the offer price. They were at 16,620 yen on Thursday, suggesting market participants believe Toyota may yet increase the price.
The investors also took issue with the planned transactions’ treatments of several Toyota group affiliates as independent minority shareholders.
This would mean that Toyota would effectively need backing from only 42 per cent of minority shareholders, rather than a majority, to seal its bid.
They asked Toyota’s board to clarify how it managed and addressed the potential conflict of interest between Chairman Akio Toyoda’s direct investment and other shareholders.
The tender offer for Toyota Industries was originally expected to launch in December, but it is now likely to begin in February or later, Toyota said this month. It is awaiting regulatory approval in some jurisdictions. REUTERS
