Exclusively: Toyota Group companies plan to sell Denso’s stake for $4.7 billion

Exclusively: Toyota Group companies plan to sell Denso’s stake for $4.7 billion

The Toyota logo is seen at a Toyota dealership in Zaventem, Belgium, on November 25, 2022. REUTERS/Johanna Geron/File image acquires license rights

  • The group companies intend to sell about 10% of their stake by the end of the year
  • Toyota Motor is expected to remain Denso’s largest shareholder
  • Denso repurchases shares to offset stock price sources

TOKYO, Nov 28 (Reuters) – Toyota Motor (7203.T) and two subsidiaries plan to sell about 10% in components maker Denso (6902.T) by the end of the year, a stake likely to be worth about $4.7 billion, sources said. Knowledgeable about the company. He said the matter.

The sale of shares in Denso represents the latest move by the world’s best-selling automaker to leverage stakes in group companies while ramping up production of all-electric vehicles, a capital-intensive endeavor that requires funding for research and development as well as an overhaul of the factory floor.

Toyota, Toyota Industries and Aisin will sell Denso shares for a total value of about 700 billion yen ($4.7 billion) at current market prices, the two sources said.

The sources added that Toyota Motor’s share of the sale will represent less than half of the approximately 10%, while Toyota Industries and Aisin will make up the rest. Denso, a major supplier to Toyota, is the world’s second-largest auto components maker.

Denso also plans to buy back some of its shares on the open market to offset a potential hit to its stock price, according to the sources, who declined to be identified because the matter remains confidential.

Denso said in a statement that it is considering share sales, buybacks and other capital measures, but nothing has been decided yet. A Toyota spokesman said the company was not in a position to comment on Denso, while a Toyota Industries spokesman said no decision had been made yet. An Aisin spokesman declined to comment.

Japanese companies have traditionally taken stakes in their group’s subsidiaries or business partners, a practice known as cross-shareholding that critics say hampers corporate governance.

Companies have been slowly unwinding these holdings for years, but the trend gained momentum after the Tokyo Stock Exchange recently urged companies to improve their use of capital.

Toyota Motor, which owned about 24.2% of Denso as of the end of September, is expected to remain the majority shareholder.

The sources said that most of the stock buyers are expected to be local investors, and the price has not yet been determined.

Toyota said in July it would sell a stake worth about 250 billion yen in telecom company KDDI Corp (9433.T) after unveiling a sweeping plan to improve driving range and lower costs of battery electric vehicles.

Denso shares, which were down nearly 4% before the news, extended their losses after the Reuters report and fell as much as 6.8% during the day, closing down 4.9%. Toyota shares ended little changed, as did the Nikkei 225 (.N225).

($1 = 148.2400 yen)

(Reporting by Miho Oranaka, Daniel Leussink and Maki Shiraki – Preparing by Mohammed for the Arabic Bulletin – Preparing by Mohammed for the Arabic Bulletin) Editing by Nobuhiro Kubo, David Dolan, Jamie Freed and Miral Fahmy

Our Standards: The Thomson Reuters Trust Principles.

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Daniel Leussink is a correspondent in Japan. More recently, he has been covering Japan’s auto industry, chronicling how some of the world’s largest automakers are transitioning to electric vehicles and unprecedented supply chain disruptions. Since joining Reuters in 2018, Leussink has also covered the Japanese economy, the 2020 Tokyo Olympics, COVID-19 and the Bank of Japan’s ultra-easy monetary policy experiment.

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