Elliott Investment Management has rejected a sweetened bid from the Toyota group to privatize Toyota Industries Corp. The investor called on other shareholders to oppose the offer and push for a better price.
Toyota raised its offer to ¥18,800 per share, a 15% increase, after pressure from minority shareholders. On Thursday, the stock climbed as much as 6.8% to ¥19,255, adding weight to demands for a higher premium.
Elliott, the most vocal opponent, said Thursday the new tender offer price continues to "very substantially" undervalue Toyota Industries and isn't in the best interest of minority shareholders. The activist fund said the company is worth more than ¥25,000 per share.
"Elliott does not intend to tender its shares under the current transaction terms and will be encouraging other shareholders not to support the tender," it said.
Hugh Sloane of UK-based fund Sloane Robinson, which owns stock in Toyota Industries, is also arguing for ¥25,000 per share.
"Toyota is trying to acquire Toyota Industries on the cheap," Sloane said. "This will encourage activists to press the trade."
The tender offer begins Thursday and will run through Feb. 12. If completed, the company will fall under the control of an unlisted real estate company called Toyota Fudosan Co., chaired by Akio Toyoda.
The offering had been scheduled to start in December but was postponed after antitrust regulators in various countries delayed the approval process.
When the Toyota group announced its take-private bid last June, its offer translated into a transaction valued at around ¥4.7 trillion, an 11% discount to its market capitalization. Critics demanded more transparency.
The protest campaign got a shot in the arm in November when Elliott revealed it had built a 5% stake in Toyota Industries. Weeks later, Bloomberg News reported the investor had begun approaching other stakeholders in Japan to build support to fight the acquisition.
Elliott has sought to build a consensus that Toyota Industries deserves a much higher premium in part because it owns about ¥6.1 trillion worth of shares in other companies.
"This higher offer is almost worse than the original given that Toyota Industries' group shareholdings are worth ¥5,300 per share more now than they were in June," said Stephen Codrington, chief executive officer of Codrington Japan.
Kenta Kon, Toyota Motor's chief financial officer, told reporters on Wednesday that the enhanced offer is a better reflection of that latent value and should address those concerns.
It's unclear if enough minority investors will agree and sign off on the deal. Electronics maker Ibiden Co. said Thursday that it plans to tender about $328 million worth of shares in Toyota Industries.
But some observers say the Toyota group may need to cough up more cash to secure the takeover.
"The higher takeover bid still seems to fall short of fair value," said Julie Boote, an analyst at Pelham Smithers Associates Ltd. "The only way to explain the price hike now is to say that this was an act of goodwill towards minority shareholders."