Toyota group plans $4.7 bln sale of Denso stake as electric pivot looms -sources

Aisin

28/11/2023 12:32

* 
      Group companies to sell about 10% stake by
year-end-sources
    

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      Toyota Motor expected to remain Denso's top
shareholder-sources
    

        * 
      Denso to buy back shares to offset hit to share
price-sources
    

  
 (Adds comment from Aisin in paragraph 6)
    By Miho Uranaka, Daniel Leussink and Maki Shiraki
       TOKYO, Nov 28 (Reuters) - Toyota Motor  7203.T  and two
affiliates plan to sell about 10% of components maker Denso
 6902.T  by year-end, a stake likely worth about $4.7 billion,
sources familiar with the matter said.
    The sale of shares in Denso would mark the latest step by
the world's top selling automaker to cash in on stakes in
affiliates as it ramps up production of fully electric vehicles,
a capital-intensive endeavour that spans research and
development to an overhaul of the factory floor.
    Toyota, Toyota Industries and Aisin will sell Denso shares
worth a total of about 700 billion yen ($4.7 billion) at current
market prices, the two sources said. 
    Toyota Motor's portion of the sale will represent short of
half of the roughly 10%, with Toyota Industries and Aisin making
up the remainder, the sources added. Denso, a key Toyota
supplier, is the world's second-largest maker of automotive
components.
        Denso also plans to buy back some of its own shares in
the open market to offset the potential hit to its share price,
according to the sources, who declined to be named because the
matter remains confidential.
    In a statement, Denso said it was considering a share sale,
a buyback and other capital measures, but that nothing had yet
been decided. A Toyota spokesperson said the company was not in
a position to comment on Denso, while a Toyota Industries
spokesperson said nothing had been decided. Aisin said reports
of the share sale were not something it had announced itself.
    At $4.7 billion, it would be the second-biggest such share
offering in Japan this year, after the more than $9 billion sale
of shares in Japan Post Bank  7182.T  in March, according to
LSEG data.
    It would also be the biggest share offering in the auto
industry in more than a decade, highlighting the stakes involved
in the pivot to battery electrics.
    
    CROSS-SHAREHOLDINGS
    Japanese companies traditionally took stakes in their group
affiliates or business partners, a practice known as
cross-shareholding which 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 firms to improve their use of capital.
    Toyota Motor, which held some 24.2% percent of Denso as of
the end of September, is expected to remain as the top
shareholder.
    Buyers of the shares are expected to largely be domestic
investors, and the price has yet to be determined, the sources
said.
    Toyota in July said it would sell a stake worth about 250
billion yen in telecoms company KDDI Corp  9433.T  after
unveiling a sweeping plan to improve the driving range and cut
costs of battery electric vehicles. 
    Denso shares, which were down almost 4% before the news,
extended losses after the Reuters report and fell as much as
6.8% on the day, closing 4.9% lower. Toyota shares finished
little changed, as did the benchmark Nikkei 225  .N225 .
($1 = 148.2400 yen)

 (Reporting by Miho Uranaka, Daniel Leussink and Maki Shiraki;
Editing by Nobuhiro Kubo, David Dolan and Jamie Freed, Miral
Fahmy and Louise Heavens)
 ((david.dolan@thomsonreuters.com; +81 3 4563 2708;))