Toy­ota de­fends con­tro­ver­sial new share sale

The China Post - - WORLD BUSINESS -

Toy­ota on Wed­nes­day de­fended a con­tro­ver­sial new share sale that crit­ics, led by over­seas in­sti­tu­tional in­vestors, de­rided as a bid to tame share­holder ac­tivism.

The world’s big­gest au­tomaker said 75 per­cent of share­hold­ers voted in fa­vor of the plan on Tues­day that will see it sell up to 50 mil­lion new shares, which must be held for five years and will not be pub­licly traded.

Largely re­stricted to Ja­panese in­vestors, the new “Model AA” stocks carry vot­ing rights and will be priced be­tween 26-30 per­cent above the value of its com­mon shares dur­ing sev­eral trad­ing days in July.

The Tokyo-listed stock slipped 0.68 per­cent to 8,338 yen (US$68) by the break Wed­nes­day.

Div­i­dends paid on the new shares will rise from 0.5 per­cent to 2.5 per­cent by the end of the five-year hold­ing pe­riod when in­vestors can con­vert them to com­mon shares or Toy­ota would re­pur­chase them, it said.

The firm said the move was aimed at lur­ing long-term in­vestors, but crit­ics said it ran afoul of Ja­pan’s new cor­po­rate gov­er­nance code, adopted ear­lier this month.

The new rules were hailed as ush­er­ing in a new era of trans­parency for share­hold­ers of Ja­panese firms, long crit­i­cized for giv­ing vo­cal in­vestors the cold shoul­der.

“An ob­jec­tive of Ja­pan’s newly ex­panded Cor­po­rate Gov­er­nance Code, is to ‘pro­mote mid- to long-term in­vest­ments’ so that share­hold­ers who hold com­pa­nyis­sued shares for a medium to long term have the po­ten­tial to be­come im­por­tant part­ners for com­pa­nies,” Toy­ota said.

It added that the new share is­sue would help fund ex­pen­sive re­search work, par­tic­u­larly on next-gen­er­a­tion tech­nol­ogy such as fuel cell cars.

But U. S.- based ad­vi­sory In­sti­tu­tional Share­holder Ser­vices coun­tered that the new class of shares would ul­ti­mately re­duce in­vestors’ in­flu­ence over man­age- ment de­ci­sions.

“It is dif­fi­cult to es­cape the im­pres­sion that the com­pany wants to in­crease sta­ble and silent in­vestors by re­plac­ing com­mon share­hold­ers with Model AA share­hold­ers,” it added.

Ni­cholas Benes, rep­re­sen­ta­tive di­rec­tor at the Board Di­rec­tor Train­ing In­sti­tute of Ja­pan, said the locked-in na­ture of the shares would turn away many prospec­tive in­vestors.

“Your stan­dard share­holder doesn’t want to give up liq­uid­ity for five years,” he told Bloomberg News.

“Toy­ota has en­coun­tered enough re­sis­tance here that you’d have to think twice about try­ing to do some­thing like this again.”

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