Toyota to take key supplier private in $26 billion deal

TOKYO, June 3 (Reuters) – Toyota (7203.T) will take a group supplier private in a $26 billion deal, the companies said on Thursday, a landmark repositioning of Japan’s most important corporation that signals the enduring influence of its founding Toyoda family.

An unlisted real estate company chaired by Toyota Chairman Akio Toyoda will offer 3.7 trillion yen ($26 billion) to take Toyota Industries (6201.T) a maker of forklifts and engines, batteries and converters, off the market.

While the deal was widely expected, the price may come as something of a shock. The real estate firm, Toyota Fudosan, is offering 16,300 yen a share – below the stock’s latest closing price of 18,400 yen.

Previous media reports indicated the deal would likely happen at around $42 billion, a 62% premium to the actual offer price.

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Separately, Toyota said it plans to buy back its own shares from Toyota Industries.

Japanese companies have come under growing scrutiny from the market regulator and investors in recent years about their cross-shareholdings in affiliates and business partners, sparking a rise in both management buyouts and acquisitions.

Many of the deals have been driven by expectations that a corporate governance overhaul will bring better shareholder returns.

Toyota had said in April it was considering participating in a potential buyout of Toyota Industries – a move that sources have said would help improve the group’s corporate governance.

Toyota owned about 24% of Toyota Industries as of September last year, while Toyota Industries held around 9% of the world’s biggest automaker and more than 5% of Denso (6902.T) another major Toyota supplier and Toyota group company.

Toyota Industries, formerly Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to make automatic looms. An automotive division within the company was set up and later spun off as Toyota Motor.