Toyota Considers Investing in $42 Billion Toyota Industries Buyout

Toyota Motor is exploring the possibility of investing in a potential buyout of Toyota Industries (OTC:TYIDF), a move that could be worth around $42 billion. In a filing with the Tokyo Stock Exchange on Saturday, Toyota confirmed it is "exploring various possibilities, including partial investment," following a Bloomberg report that Toyota Chairman Akio Toyoda and his founding family proposed the acquisition in a deal valued at 6 trillion yen ($42 billion).

Toyota Industries, with a market value of 4 trillion yen, acknowledged receiving proposals to go private through a special purpose company but denied receiving a direct buyout offer from Akio Toyoda or the Toyota group. Sources familiar with the situation said Toyota Industries is considering funding options through Toyota, its group companies, and major banks, but emphasized the proposal did not originate from the chairman or Toyota group leadership.

If successful, taking Toyota Industries private could help the Toyota group improve corporate governance by unwinding complex cross-shareholdings. Currently, Toyota owns 24% of Toyota Industries, while Toyota Industries holds 9.07% of Toyota and 5.41% of Denso, another major supplier. Cross-shareholdings, common in Japan, have faced mounting regulatory and shareholder scrutiny for insulating management from shareholder interests.

Toyota Industries, founded in 1926 as Toyoda Automatic Loom Works by Sakichi Toyoda, manufactures forklifts, engines, and also produces the popular RAV4 SUV for Toyota Motor (NYSE:TM). It has recently faced shareholder pressure to unwind cross-shareholdings and boost returns, selling stakes in key affiliates like Aisin. Going private could give Toyota Industries more strategic freedom to invest and grow without short-term shareholder pressures. Both Toyota and Toyota Industries emphasized that no final decision has been made.