The companies announced on Tuesday that Toyota Motor will take forklift maker Toyota Industries, private in a $33 billion deal.
The companies said that going private will allow Toyota Industries to take a longer-term business perspective.
As part of a government push for better governance, Japanese conglomerates are under increasing pressure to unwind stakes in each other.
This historic unwinding of cross-shareholding is likely to strengthen the influence of the group’s founding Toyoda family.
incent Sun, a senior analyst at Morningstar, stated, “It streamlines the cross-shareholdings a bit within the group,” “We think it makes sense for Toyota Motor to have a stake in Toyota Industries to leverage on any potential autonomous (logistics) technology in the future.”
According to a spokesperson, the entire cost of the acquisition for the Toyota Group will be approximately 4.7 trillion yen ($33 billion), which includes a $26 billion tender offer for Toyota Industries shares at 16,300 yen each, significantly less than the closing price of 18,400 yen on Tuesday prior to the announcement of the deal.
The companies also stated that a new holding company will be established for the deal.
Group real estate company Toyota Fudosan will invest 180 billion yen, while Chairman Akio Toyoda will contribute 1 billion yen, and Toyota Motor will invest 700 billion yen in non-voting preferred shares.
Although the deal was widely anticipated, the price may come as a bit of a shock.
According to media reports, the tender offer would be around $42 billion, a 62% premium to the actual offer.
Toyota Motor and group companies Aisin, Denso, and Toyota Tsusho will all sell their shares in Toyota Industries and acquire their own shares currently held by it.
“Toyota Group is focusing on the movement of people, goods, information, and energy as it progresses towards transforming into a mobility company,” the companies declared, adding that Toyota Industries would concentrate on the transportation of goods.
As of September of last year, Toyota owned over 24 percent of Toyota Industries, while the latter owned over 5 percent of Denso and about 9 percent of the largest carmaker in the world.
Sakichi Toyoda established Toyota Industries, originally Toyoda Automatic Loom Works, in 1926 with the goal of producing automatic looms.
The business established an automotive division, which subsequently became Toyota Motor.
