"Opaque" 370 billion yen transaction? Global investors demand Toyota to disclose valuation details

According to the Zhitong Finance APP, global investors are calling on Toyota Motor (TM.US) to disclose more information regarding the proposed acquisition of its subsidiary Toyota Industries, criticizing the transaction's valuation as "opaque" and failing to protect minority shareholders' interests.

A letter signed by about twenty asset management firms, including AllianceBernstein (AB.US), Loomis Sayles, and Schroders, dated August 8, was made public on Thursday. This move may intensify scrutiny of what is seen as a milestone transaction to eliminate cross-shareholding, while also potentially further consolidating the Toyota family's influence within the group.

It is understood that Toyota Industries (a forklift manufacturer and major supplier to Toyota Motor) will be privatized by Toyota Motor, the group's real estate company Toyota Real Estate, and Toyota Chairman Akio Toyoda.

The transaction is under close watch as it involves the restructuring of Japan's most important corporate group and comes at a time when regulators and the government are pushing for improvements in corporate governance.

According to disclosures, the proposed transaction involves a tender offer of 16,300 yen per share, totaling 370 billion yen (approximately $2.45 billion), which represents a premium of about 23% over the stock price before the news broke in April. Investors have pointed out that this premium is significantly lower than the average premium of 44% for similar transactions on the Tokyo Stock Exchange.

The letter states that the transaction could "either strengthen or weaken the progress of corporate governance reforms" and demands the disclosure of all valuation models, tax assumptions, and third-party assessment reports used to determine the offer price.

Amar Gill, Secretary-General of the Asian Corporate Governance Association (ACGA), stated that the organization has had multiple calls with both companies and arranged for independent directors of Toyota Industries to participate in discussions, a level of engagement that is relatively rare.

Toyota Motor stated in a statement that it has engaged in "multiple rounds of constructive dialogue" with the ACGA and is working to provide detailed explanations. The company said, "This transaction involves negotiations between independent companies conducted in good faith through fair and independent processes, fully considering the interests of minority shareholders. We will promptly announce any matters that need to be disclosed in the future."

Notably, Toyota Industries' stock price on Thursday (16,620 yen) was already above the acquisition offer, with the market generally expecting Toyota to potentially raise the acquisition price.

Investors also questioned the practice of treating multiple Toyota Group affiliated companies as independent minority shareholders, which would mean Toyota only needs to obtain support from 42% of minority shareholders to complete the transaction, rather than a majority.

They are calling for the Toyota board to clarify how it will manage and resolve potential conflicts of interest between Chairman Akio Toyoda's direct investments and those of other shareholders.

Toyota indicated this month that the tender offer originally scheduled to start in December may be postponed until February or later, as it awaits regulatory approvals from certain jurisdictions