On April 27, Toyota Motor announced that it is exploring the possibility of a potential acquisition investment in Toyota Industries, a key parts supplier, which could cost up to 6 trillion yen (approximately 304.86 billion RMB at current exchange rates). In a filing submitted to the Tokyo Stock Exchange last Saturday, Toyota Motor stated, “We are currently exploring various possibilities, including partial investment.” This follows earlier reports suggesting Toyota might acquire Toyota Industries.

Bloomberg News reported on Friday that Toyota Motor Chairman Akio Toyoda and the founding family proposed a plan to acquire Toyota Industries for around 6 trillion yen. However, Toyota Industries issued a statement clarifying that while it has received a proposal for privatization through a special purpose company, it has not received any acquisition offers from Akio Toyoda or the Toyota Group.

Two sources familiar with the matter revealed that Toyota Industries is considering raising funds from Toyota, its group companies, and major banks to facilitate the acquisition. They emphasized that the proposal did not originate from Akio Toyoda or the Toyota Group. The sources noted that privatizing Toyota Industries could improve corporate governance within the Toyota Group by eliminating cross-shareholdings.

Both Toyota Motor and Toyota Industries stated in their respective announcements that no decisions have been made at this time, as reported by Reuters.

As of September last year, Toyota Motor Corporation held a 24% stake in Toyota Industries Corporation, while Toyota Industries, in turn, owned 9.07% of Toyota Motor and 5.41% of Denso Corporation, a key Toyota supplier. Toyota Industries has been under pressure from shareholders to unwind cross-shareholdings in order to enhance shareholder returns and facilitate investments. The company has already divested some of its cross-held shares, including its stake in Aisin Seiki Co., another core supplier within the Toyota Group. Sources indicate that privatization would also allow Toyota Industries to focus on growth strategies without the constant concern for shareholder returns. In Japan, cross-shareholding is a common practice where companies hold shares in each other. However, this practice has increasingly come under scrutiny from regulators and shareholders in recent years, as it may insulate management from serving the interests of ordinary shareholders. Toyota Industries, formerly known as Toyota Automatic Loom Works, was founded in 1926 by Sakichi Toyota initially to produce automatic looms. The company later established an automotive division, which was eventually spun off to become Toyota Motor Corporation. Today, Toyota Industries is a major manufacturer of forklifts and also produces the RAV4 sport utility vehicle and engines for Toyota Motor.