Toyota, Denso, and Toyota Industries to sell $1.1 billion in Aisin shares

Toyota Motor Corp., Denso Corp., and Toyota Industries Corp. have announced plans to sell shares worth approximately ¥178 billion ($1.1 billion) in Aisin Corporation.

The decision is part of a broader strategy to enhance capital efficiency and drive future growth for the group while maintaining strong capital ties.

Sale to fund strategic investments

The trio’s move to offload shares in Aisin is aimed at helping Toyota to invest in key growth areas.

Toyota said in a statement:

AISIN will continue to strengthen the Toyota Group’s competitiveness by utilizing its wide range of hardware and software product lines and manufacturing capabilities. Toyota plans to use the generated capital to make growth investments focused on electrification, intelligence, and diversification initiatives.

Post-sale, Toyota will hold a 20% stake in Aisin, down from its previous 24.8% holding.

The sale price for the shares has yet to be determined, but calculations based on Aisin’s closing share price suggest the deal will be valued at ¥177.5 billion ($1.11 billion).

Strategic divestment follows similar moves

This latest announcement mirrors a similar action taken by Toyota, Aisin, and Toyota Industries in November, when they sold shares in auto parts maker Denso. This sparked investor optimism about further reductions in cross-shareholdings.

Toyota’s strategy to cash in on stakes in its affiliates is closely watched due to its significant influence in corporate Japan.

The automaker has been accelerating its development and production of battery-powered vehicles and is reviewing its capital ties with other group companies on an individual basis.

Market and regulatory perspectives

The scope of Toyota’s cross-shareholdings and its pace of divestment are significant for the market. Cross-shareholding, a traditional practice in Japan, involves companies taking stakes in affiliates and business partners.

This practice has been under scrutiny from Japan’s financial regulator, and investors have been keenly observing the unwinding of such holdings, hoping it will drive up the country’s stock market.

As part of the Aisin share sale, Denso and Toyota Industries will each sell just under 13 million shares through a secondary offering, while Toyota will sell about 7.9 million shares.

Additionally, Toyota plans to sell another 5 million shares through the offering’s overallotment. Aisin has also announced a 3-1 stock split to take place later this year.

Shareholder dynamics

The decision to reduce the stake in Aisin follows a recent drop in shareholder backing for Toyota Chairman Akio Toyoda, which hit a record low at the company’s annual general meeting last week.

This move could be seen as part of a broader effort to appease shareholders and improve corporate governance.

In separate statements, Denso and Aisin disclosed that they had sold off holdings in several Toyota Group companies as of the financial year ending in March, further indicating a trend towards unwinding cross-shareholdings within the group.

Toyota, Denso, and Toyota Industries’ decision to sell shares in Aisin Corporation marks a strategic move to enhance capital efficiency and fund investments in key growth areas.

This move is part of a broader trend in corporate Japan to unwind cross-shareholdings, a practice that has come under increasing scrutiny from regulators and investors alike.

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