Revised Toyota Industries Offer Won't Settle Valuation Debate

Toyota Motor Corp (NYSE:TM) has increased its buyout offer for Toyota Industries Corp after sustained pressure from activist investors, lifting the proposed valuation to 6.1 trillion yen.

The revised offer, at 18,800 yen per share, is a 15% increase from the original 16,300 yen per share.

The tender offer will begin on Thursday and run through Feb. 12.

Despite the increase, critics argue the new price still undervalues the company. Hugh Sloane of UK-based fund Sloane Robinson, which owns stock in Toyota Industries, believes the company is worth at least 25,000 yen per share.

Why Did This Happen?

The revised offer comes after months of visible investor pushback, led by Elliott Investment Management, which argued the initial proposal undervalued the business. Elliott had built a 5% stake in Toyota Industries and approached other investors to build support for its campaign.

Toyota Industries shares have traded above the original offer since late August, indicating that investors expected an improved bid.

The tender offer had been delayed from an initial December timeline due to antitrust approvals and concerns over transparency and the treatment of minority shareholders.

How Did Markets React?

Toyota Industries shares closed at 18,025 yen on Wednesday, just below the new offer price, suggesting investors were anticipating a higher bid.

The higher bid could be a significant moment for shareholder activism in Japan, particularly given Toyota's size and influence. The transaction would strengthen the founding family's grip on the broader group by taking Toyota Industries private through a special-purpose vehicle controlled mainly by Toyota Fudosan.

What Are Analysts Watching Next?

Analysts remain divided over whether the revised offer addresses the concerns of minority shareholders. Julie Boote of Pelham Smithers Associates said the higher takeover bid still seems to fall short of fair value.

Stephen Codrington of Codrington Japan noted that the higher offer is almost worse than the original, as Toyota Industries' group shareholdings are worth 5,300 yen more per share now than they were in June.

Kenta Kon, Toyota Motor's CFO, stated that the enhanced offer better reflects the latent value of Toyota Industries and should address investor concerns. However, it remains unclear if enough minority investors will agree and sign off on the deal.

Toyota Industries, which produces forklifts, cars, engines, and textile machinery, plans to further advance its autonomous technologies for forklifts and logistics management software by going private.

The tender offer is now valued at 5.6 trillion yen, equivalent to $35.18 billion, based on about 300 million shares outstanding.

The company was founded by Sakichi Toyoda, the great-grandfather of current Toyota Motor Chairman Akio Toyoda, and from which Toyota Motor was spun off in 1937.

The outcome of this acquisition could shape future buyouts across corporate Japan, particularly in a market working to reduce cross-shareholdings and improve corporate governance.

The tender offer period will begin on Jan. 15 and run through Feb. 12, according to a regulatory filing by Denso.

The revised offer is one of the largest acquisitions on record and has drawn significant attention from global investors.