Elliott says offer for Toyota Industries is 40% undervalued, proposes alternative plan
Jan 19 : Activist investor Elliott Investment Management on Sunday said the Toyota Group's bid to take Toyota Industries private undervalues the forklift maker by almost 40 per cent and proposed a growth plan that it said would more than double the company's value by 2028.
Elliott called on shareholders not to tender into last week's revised 18,800 ($119.24) yen per share offer by Toyota Motor, group company Toyota Fudosan and Toyota chairman Akio Toyoda.
The take-private plan, first proposed last June at 16,300 yen per share, has come under fire from investors criticising what they argued was an opaque valuation methodology and a process that failed to protect minority shareholder interests.
Pressure on the world's largest automaker increased after Elliott, one of the world's most prominent activist hedge funds, disclosed its stake in November. Its stake stood above 5 per cent in December.
Elliott said it is now Toyota Industries' largest minority shareholder.
Elliott also said that it had been discussing a "standalone plan" - involving unwinding cross-shareholdings, improving governance and margins - with the company's board and special committee that would achieve a valuation of 40,000 yen per share by 2028.
Toyota Industries could also improve capital allocation by ceasing overinvestment in the automotive segment, Elliott added.
Toyota Motor said in a statement that it was aware of Elliott's open letter and would continue to closely monitor the situation.
In statements matching comments from last week, Toyota Fudosan and Toyota Industries said they believed the latest offer price represented a level that reflected the company's intrinsic value, and would engage in sincere dialogue with investors. Toyota Fudosan added that it had had thorough discussions with the firm about it.
Toyota Industries' share price has traded above the revised offer price since last week and closed at 19,510 yen per share on Monday.
Elliott said its analysis showed Toyota Industries' intrinsic net asset value to be more than 26,134 yen per share, as of January 16.
"If the Revised TOB is allowed to succeed, it will result in a substantial and potentially irreversible setback for Japan's corporate governance reforms and dampen investor interest in the Japanese market," Elliott said in its letter.
($1 = 157.6700 yen)
