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Denso to sell off cross-shareholdings and use proceeds on M&A
Global Banking & Finance Review®
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TOKYO (Reuters) – Toyota Motor supplier Denso plans to eventually sell all of its cross-shareholdings, its president said on Friday, as the company looks to fund acquisitions and other
TOKYO (Reuters) – Toyota Motor supplier Denso plans to eventually sell all of its cross-shareholdings, its president said on Friday, as the company looks to fund acquisitions and other investments.
Investors have long pressured Japanese companies to sell-off cross-shareholdings and put their capital to better use. Firms have been gradually selling down their stakes, thanks in part to a governance push by the Tokyo Stock Exchange and the government.
Toyota and some other of its group companies last year sold around 8% of Denso, a move that was seen as a critical first step by the sprawling Toyota Group and heightening expectation of more sales to come.
* Denso President Shinnosuke Hayashi told a briefing the supplier of auto components will continue selling its cross-shareholdings, with the intent to sell all of them, after holding talks with the companies involved.
* Denso, which doesn’t disclose the size of its cross-shareholdings, in March announced plans to sell all of its 9.1% stake in Toyota Industries.
* It has also cut holdings in JTEKT, another group company.
“Basically, we are not going to hold a portion of the shares, but rather we are moving towards selling all of our shares,” Executive Vice President Yasushi Matsui told the briefing.
* Hayashi said the elimination of cross-shareholdings was important for increasing the competitiveness of the entire industry.
* Denso reported a 11% decline in full-year operating profit on Friday.
* It forecast an 88% profit increase for the year to March, for 714 billion yen ($4.6 billion).
($1 = 156.6300 yen)
Cross-shareholdings occur when two or more companies hold shares in each other. This practice can create strategic alliances but may also lead to conflicts of interest and reduced market efficiency.
Operating profit is the profit a company makes from its normal business operations, excluding any income derived from non-operational activities, such as investments or sales of assets.
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