Toyota Announces $19 Billion Share Unwinding as Part of Corporate Governance Overhaul

Toyota is embarking on an extensive unwinding of its strategic cross- shareholdings, which is expected to involve banks and insurance companies offloading around 3 trillion yen (approximately $19 billion) worth of shares. This initiative is viewed as a substantial advancement in the reforms of corporate governance within Japan, according to insiders familiar with the developments.

The projected sales could reach around 3 trillion yen; however, the total may fluctuate based on the willingness of shareholders to divest their holdings. Toyota aims to complete the transactions as soon as this year, although the specific timing and scale of the operation remain indefinite and might be reconsidered depending on shareholder reactions.

Insiders, who requested anonymity as the information is yet to be publicly disclosed, indicated that part of the shares could be repurchased by Toyota itself, while a secondary offering to other investors is also being contemplated.

Following reports of this initiative, Toyota's stock saw a rise of approximately 2% in afternoon trading, surpassing the overall market performance.

This strategic move by the world's leading automaker is a significant step in Japan’s ongoing pursuit of enhancing corporate governance, amidst calls from the Tokyo Stock Exchange and regulators for companies to dismantle cross- shareholding practices.

These cross-shareholding arrangements, where companies maintain stakes in each other to fortify business ties, have faced scrutiny from governance experts and foreign investors for creating a buffer between management and shareholder accountability. Although prevalent in Japan for years, such practices are notably less common in Western economies.

Despite having a policy aimed at decreasing cross-shareholdings, Toyota has encountered investor criticism concerning its governance approaches and has been urged to enhance capital efficiency.

One insider revealed that the automaker's goal is to showcase its dedication to governance reforms by unwinding these strategic stakes.

Additionally, this development coincides with Toyota's ongoing tender offer for Toyota Industries, a forklift manufacturer, which has encountered resistance from activist investor Elliott, who claims the offer is undervalued and lacks transparency.

Toyota has recently extended the deadline for the tender offer to March 2, following a challenge in garnering sufficient shareholder backing.

Notable shareholders in Toyota include major financial entities like Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, along with insurance firms such as MS&AD; Insurance Group.