Toyota Increases Bid for Toyota Industries Following Activist Pressure, Raising Governance Questions

BY COMFORT OGBONNA

Toyota’s decision to further increase its bid for group company Toyota Industries marks a notable win for activist fund Elliott Investment Management, which had lobbied for months for a higher offer. The automaker raised its offer for the forklift and industrial equipment maker, known as TICO, for the second time to 20,600 yen ($131) per share, valuing the deal at roughly $30 billion.

While the higher price satisfied Elliott, which agreed to tender its stake, the move does not fully resolve longstanding governance concerns. Investors have questioned whether the transaction remains fair to minority shareholders, especially as Toyota Chairman Akio Toyoda stands to benefit directly from the deal. The activist fund had previously rejected a lower bid of 18,800 yen per share, arguing that TICO shares were worth about 26,134 yen apiece.

The buyout aims to give TICO, a key Toyota supplier, greater flexibility to pivot toward advanced mobility technologies without the pressure of short-term profit targets. The Toyota group initially offered 16,300 yen per share in June, a move that sparked outrage from minority shareholders who argued the price was too low and the process lacked transparency. Some overseas investors even filed complaints with the Tokyo Stock Exchange, claiming the deal undermined corporate governance reforms in Japan.

Amar Gill, secretary general of the Asian Corporate Governance Association, noted that the price increase is a positive step for minority shareholders but highlighted persistent governance issues. “The fact that the price was revised up twice, with the final offer significantly above the initial one, is clearly a better outcome for minority shareholders,” he said. “Yet various governance concerns remain, including the questionable treatment of group companies as independent minority shareholders and a lack of clarity on expected synergies.”

The association, along with around two dozen investors, raised these concerns in a letter sent in August to TICO and Toyota. They cited insufficient financial disclosure and argued that classifying Toyota group companies as minority shareholders effectively lowered the voting threshold needed to approve the deal. In response, TICO released additional financial details and held meetings with investors to address transparency concerns.

TICO emphasized that it had consulted outside directors and independent firms, receiving three fairness opinions to ensure the process was unbiased. Toyota, for its part, maintains that the transaction is fair to all shareholders and rejects claims that Toyoda benefits unduly.

Nonetheless, the deal will increase Toyoda’s personal stake in TICO from 0.05% to 0.5%, costing him around $6.5 million and consolidating his influence over the supplier. Some investors, particularly those based in London, described the offer as “inadequate” given the company’s strong asset base, but they indicated they would likely have little choice but to tender shares following Elliott’s support.

For the bid to succeed, at least 42.01% of minority shareholders—excluding Toyota Motor’s 24.66% stake—must accept the offer. The offer is set to close on March 16. A key point of controversy remains the classification of certain Toyota group companies, including parts makers Denso and Aisin and trading company Toyota Tsusho, which collectively hold 12.21% of TICO, as independent minority shareholders. Toyota Fudosan, leading the buyout, defends the classification, arguing these are independent, listed entities making their own decisions.

The deal has been widely viewed as a test case for corporate governance in Japan. Julie Boote, an auto analyst at Pelham Smithers Associates, said the outcome highlights how far Japanese companies still have to go in protecting minority shareholder rights. “These developments do not demonstrate that Japanese corporate governance reforms have significantly changed companies’ attitudes toward shareholder rights, given that Toyota only increased its offer after activist pressure,” she said.

Still, Gill emphasized the importance of TICO providing an independent director to address investor questions, calling it a positive precedent. “The company’s outreach to investors, combined with activist pressure, contributed to this outcome,” he said, noting that such engagement should become standard practice in Japan for similar transactions.