Exclusive: Toyota group companies plan $4.7 billion sale of Denso stake

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 group companies as it ramps up production of fully electric vehicles, a capital-intensive endeavour that requires funding for research and development as well as a factory-floor overhaul.

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. An Aisin spokesperson declined to comment.

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)

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