The $33 billion take-private transaction involving Toyota Industries, a key supplier to Toyota Motor, has come under sharp criticism from a leading corporate governance group, raising fresh concerns over Japan’s efforts to improve shareholder protections.
The Hong Kong-based Asian Corporate Governance Association (ACGA), representing investors managing over $40 trillion in assets, described the deal as a “study in opacity” in a report released Thursday. The association warned that the buyout “risks squandering” the progress Japan has made in corporate governance reform over the past decade.
Last month, Toyota Industries accepted a ¥16,300 ($113) per share offer led by Toyota Fudosan, a private real estate firm, and Akio Toyoda, chair of Toyota Motor — the world’s largest automaker by sales. While the transaction aims to address governance issues linked to Toyota Motor’s complex cross-holdings with affiliates like Toyota Industries, institutional investors have criticized the deal for a lack of transparency and a perceived undervaluation.
The ACGA pointed out that the 23% premium over the share price prior to media reports is significantly lower than the average 44% premium seen in Japanese management buyouts. The association also criticized the special committee overseeing the deal for insufficient independence and inadequate efforts to secure a fair price, echoing concerns raised by overseas and retail investors.
“The process that led to the deal’s terms is, by any international standard, a study in opacity,” said Anuja Agarwal, head of research for Japan and India at ACGA. “Beneath the surface, the deal exposes the persistent fragilities of Japan’s corporate governance regime and the enduring power of entrenched interests.”
Japan’s government and the Tokyo Stock Exchange have made notable governance reforms, such as increasing the presence of independent directors and enhancing corporate focus on investor returns. However, many international investors view the Toyota Industries buyout as a pivotal moment that questions whether existing measures sufficiently protect minority shareholders.
Toyota Motor declined to comment, and Toyota Industries did not immediately respond to requests for comment. The company has defended the valuation, citing assessments by external advisers including SMBC Nikko and Mitsubishi UFJ Morgan Stanley.
Akio Toyoda, who will retain a 0.5% stake after investing ¥1 billion personally, denied that the transaction strengthens his control, stating it would enable Toyota Industries to focus on long-term growth. The company’s diverse operations include forklifts, automotive parts, and textile machinery.
London-based fund Mondrian Partners, among the shareholders opposing the deal, criticized the valuation methodology used by independent advisers as resulting in an “unjustifiably low” price. Mondrian called for “greater transparency over valuation assessments.”
For the deal to succeed, at least 42% of Toyota Industries shares must be tendered. However, affiliates within the Toyota Group, including Denso, Aisin, and Toyota Tsusho, collectively own 12.2% and are treated as independent minority shareholders — a classification ACGA labeled “perhaps the most egregious governance failing” of the transaction.
