Toyota Proposes $42B Acquisition of Toyota Industries, Stock Surges 23%

Toyota Motor Corporation (TM.US) has proposed a significant acquisition of Toyota Industries Corporation for 6 trillion yen, approximately 42 billion USD. This move has sparked considerable interest in the market, with Toyota Industries' stock surging to its daily limit of 23% upon resumption of trading after a temporary halt on Monday. The proposed acquisition values Toyota Industries at a 40% premium over its market value at the close of trading on Friday.

The acquisition proposal was initiated by Toyota Motor Corporation's Chairman, Akio Toyoda. In response, Toyota Industries has formed a special committee, along with external advisors, to evaluate the offer. Toyota Industries, founded by Akio Toyoda's great-grandfather, is a critical supplier of components for Toyota Motor Corporation and also produces textile machinery.

This proposed acquisition is part of a broader trend of increased merger and acquisition activity reshaping the Japanese corporate landscape. Akio Toyoda's move aims to strengthen his control over the Toyota Group, one of Japan's largest business conglomerates and the world's leading automaker. If finalized, this deal would rank among the largest acquisitions globally.

The acquisition proposal has raised concerns among some investors about the potential impact on corporate governance improvements within the Toyota Group. While the Toyoda family would gain greater control over the group's operations through their stake in Toyota Industries, this could hinder ongoing efforts to enhance corporate governance. Akio Toyoda's support among shareholders has declined from 96% three years ago to 72% currently, partly due to the company's hesitation in transitioning to battery-powered electric vehicles and its handling of a series of safety certification scandals involving Toyota's automatic looms, Daihatsu Motor Company, and Toyota Motor Corporation itself.

Toyota Motor Corporation, in a statement released last Friday, indicated that it is exploring various options, including partial investment in Toyota Industries, but has not made any final decisions. The proposed acquisition, if successful, would further consolidate Akio Toyoda's influence over the Toyota Group, which includes suppliers and investments in other companies, some of which are competitors in the automotive industry.