Toyota Industries shares set to surge on potential buyout by Toyota Motor

Shares of Toyota Industries (6201.T) were set for their biggest daily jump on record on Monday after Japanese automaker Toyota said it was considering a potential buyout of the key parts supplier, which has a market value of 4 trillion yen ($28 billion).

In Tokyo, Toyota Industries shares remained untraded on Monday amid a flood of buy orders. Bid and ask prices indicated the stock was poised to hit the daily upper limit of 16,225 yen, marking a 23% surge from Friday’s closing price of 13,225 yen. Reuters calculated the company’s market capitalisation based on Friday’s close.

Such a rise would mark the stock's biggest one-day jump in at least four decades, according to LSEG data going back to early 1984. On Saturday, Toyota said in a filing with the Tokyo stock

exchange it was exploring various possibilities, including a partial investment in Toyota Industries. Bloomberg News reported on Friday that Toyota Chairman Akio Toyoda and his founding family have proposed acquiring Toyota Industries in a potential 6 trillion yen deal.

In a statement on Saturday, Toyota Industries confirmed it had received proposals about going private through a special purpose company but it denied receiving a buyout offer from the Toyota chairman or the Toyota group.

The possible buyout comes as Japanese companies have faced increasing pressure in recent years to unwind their cross-shareholdings in affiliates and business partners, which in many cases have been held over the long term.

Toyota owned about 24% of Toyota Industries as of September last year, while Toyota Industries held just over 9% of the world's biggest automaker and more than 5% of Denso, another key Toyota supplier.

In an April 23 report, analysts at Bernstein said Toyota Industries' potential sale of its stake in Toyota was a strong positive catalyst for its share price, adding privatisation of the supplier was a possible scenario.

Under that scenario, Toyota would repurchase its stake in Toyota Industries while simultaneously acquiring the company's high-growth materials handling equipment business at little to no cost, the report said. Toyota Industries makes forklifts through that division.

Toyota industries, formerly Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to manufacture automatic looms. An automotive division within the company was created and later spun off as Toyota Motor.

In addition to forklifts, Toyota Industries manufactures the RAV4 sport utility vehicle for Toyota. It also produces engines, air-conditioning compressors for cars and electronic parts such as batteries and converters.