Toyota Motor disclosed it seeks to explore different options while examining a possible investment leading up to a potential USD 42 billion takeover of its essential parts supplying company Toyota Industries. According to a Saturday filing on the Tokyo stock exchange Toyota Motor released its examination of different investment options.

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Toyota evaluated partial investment criteria but Toyota Industries received proposals from investors about potential acquisition via special purpose company organizations. The Toyota supplier completely rejected any direct negotiation attempts regarding a buyout from Toyota chairman Akio Toyoda or Toyota group stakeholders.

Sources suggest Toyota Industries might seek financial backing from Toyota alongside its associated companies and several major banks for an acquisition of the company. The proposal which exists at present originated outside Akio Toyoda along with the entire Toyota group. Source indicators suggest that private ownership of Toyota Industries would provide better corporate governance to the Toyota group through breaking existing cross-shareholding frameworks.

Toyota Industries along with Toyota declared that no final decisions regarding the matter have been reached. Toyota Motor currently owns a 24% stake in Toyota Industries and Toyota Industries possesses a 9.07% stake in Toyota Motor alongside a 5.41% stake in Denso which stands as another important supplier company.

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Also Read | Toyota Industries shares soar on potential USD 28 billion buyout by Toyota Motor

Shareholders force Toyota Industries to remove its cross-shareholding investments because these holdings decrease shareholder value and limit investment opportunities. Aisin represents one of the core Toyota supplier businesses that the company has divested from its holdings. According to sources Toyota Industries would achieve greater operational independence when it becomes a privately owned company since shareholder return pressures would decrease.

Regulators and shareholders now closely monitor cross-shareholdings because these Japanese business structures are believed to provide management protection against prioritizing profits for common shareholders. Toyota Industries, originally founded as Toyoda Automatic Loom Works, has a significant automotive division that manufactures forklifts, the RAV4 SUV for Toyota Motor, and various engines.