Elliott Investment Management has gradually built a significant stake in Toyota Industries Corp. and informed the Toyota Group affiliate that its proposed privatization offer price is too low, according to people familiar with the matter.
Toyota Industries disclosed in a November 11 filing that Elliott held a 3.26% stake as of September 30, making it one of the company's largest shareholders. The stake has since risen to nearly 5%, the sources said, requesting anonymity as the information is not public.
Elliott has communicated to Toyota Industries' management that the ¥16,300 per share offer undervalues the company and proposed alternative transaction structures, the sources added.
The activist investor's involvement expands the group of Toyota Industries shareholders criticizing Japan's largest privatization proposal. In June, a consortium led by Akio Toyoda announced a ¥4.7 trillion ($30.5 billion) buyout of Toyota Industries at an 11% discount to its then-closing price—a valuation investors argue significantly undervalues the company.
Toyota Industries, which manufactures forklifts and textile machinery, is the predecessor of Toyota Motor Corp. The proposed acquisition would be executed through a newly formed holding company under Toyota Fudosan Co., an unlisted real estate firm also chaired by Toyoda.
In a statement, Elliott called the deal "a significant undervaluation of Toyota Industries" and criticized its "lack of transparency and failure to meet proper governance standards."
A Toyota Industries spokesperson said the company maintains dialogue with shareholders including Elliott but declined further comment. Toyota Fudosan did not immediately respond to requests for comment.
Scheduled to launch next year, the tender offer would rank among the largest acquisitions globally if completed, further consolidating the Toyoda family's control over Japan's biggest corporate group.
Toyota Industries shares closed 1.8% higher at ¥17,250 in Tokyo on November 11, remaining above the offer price since late August.
Elliott has focused on Toyota Industries' cross-shareholdings in other companies, whose values have appreciated. Such inter-company stakes are common in Japan, often maintained to strengthen business ties. The top ten cross-held assets in Toyota Industries' portfolio have risen over 20% since the buyout announcement.
Some analysts value Toyota Industries above the offer price. United First Partners estimated its net asset value at ¥22,782 per share in September, while Global Equity Research's Arun George pegged it at ¥19,607 in a November 6 Smartkarma report.
The timing of Elliott's stakebuilding remains unclear, but the investor was not listed among major shareholders in Toyota Industries' previous March 31 filing.
Activist investing in Japan has grown alongside corporate governance reforms. Data shows 146 activist campaigns were launched in Japan last year—a record high and more than double the figure four years ago—second only to the U.S.
In August, over 20 investors jointly wrote to Toyota Industries and Toyota Motor's boards demanding greater deal transparency and consideration for minority shareholders.
The Toyota Group maintains its original offer. Toyota Motor CEO Koji Sato said last month that Toyota Fudosan has no plans to raise its bid.