Toyoda taps bankers for $42 billion Toyota industries buyout

Toyota Motor Corp. Chairman Akio Toyoda’s ¥6 trillion ($42 billion) plan to buy out Toyota Industries Corp. is progressing, with the parties involved having picked financial advisers and working toward a tender offer as soon as November, people familiar with the matter said.

The special purpose vehicle established by Toyoda for the buyout is being advised by Nomura Holdings Inc., while Toyota Industries has appointed SMBC Nikko Securities Inc. as its adviser, the people said, asking not to be identified discussing private matters.

The company’s special board committee, created to evaluate the proposal as per government guidelines, has meanwhile hired Mitsubishi UFJ Morgan Stanley Securities Co., they said. The plan now is for Toyoda’s special purpose company to carry out a tender offer for all of the shares in Toyota Industries as soon as November, following presentations to shareholders, the people said.

Akio Toyoda will put in personal investment of his own, as will Toyota Motor, according to the people. Although Akio is chairman of the world’s No. 1 carmaker, his direct ownership stands at less than 1%, while Toyota Industries has a 9.1% stake in the manufacturer. Toyota Industries shares rose as much as 4.6% to a record in early morning trading in Tokyo on Thursday. The company is worth around ¥5.6 trillion ($39 billion), up more than 30% since news of the buyout became public on April 25.

The developments show that the buyout — which would be Japan’s largest-ever and among the world’s biggest — is proceeding swiftly. Toyoda’s plan to take the supplier of textile looms, forklifts and parts for Toyota’s cars private has been widely speculated upon in Japan. Some investors are uncertain if the move marks a consolidation of his power over the Toyota empire; others see it as a positive step toward strengthening corporate governance by unwinding cross-shareholdings.

Representatives for Toyota Industries, Toyota Motor, Nomura, SMBC Nikko Securities and Mitsubishi UFJ Morgan Stanley declined to comment.

Last month, Toyota Motor said it was considering various possibilities, including a partial investment in Toyota Industries, but that nothing had been decided. Toyota Industries said separately that it was considering all possibilities, including capital policies, to enhance the corporate value of the group.

There’s a complex web of cross shareholdings among Toyota group companies with Toyota Motor holding 24.2% of Toyota Industries’ shares and Toyota Fudosan Co., a private real estate developer chaired by Toyoda, owns 5.32% of the supplier.  Japan is accelerating efforts to unwind such arrangements among companies, aiming to improve corporate governance, enhance transparency and boost shareholder returns.

Toyoda’s buyout plan comes as Toyota seeks to rebuild trust in its governance after a series of regulatory scandals were uncovered at a pair of subsidiaries that included Toyota Industries.