Toyota Group (TM.US) has announced an extension to the acceptance period for its tender offer to take a key subsidiary private. This move indicates the Japanese industrial giant requires more time to secure shareholder support amid strong resistance from activist investment firm Elliott Investment Management. According to the announcement, the new deadline has been set for March 2, while the offer price remains unchanged from the initial expiration date this past Thursday. This extension marks a further escalation in the high-stakes standoff between Toyota and Elliott, simultaneously providing the activist fund with continued opportunity to block a deal it views as significantly undervaluing the subsidiary.

While the extension offers Toyota a window to lobby more investors, it also leaves room for the share price to rise further above the tender offer price. This dynamic could pressure Toyota to increase its premium to get the deal approved. The privatization plan has been contentious from the outset. Toyota's initial offer of 16,300 yen per share last June drew immediate criticism from investors and analysts, who accused the company of attempting a "low-ball" bid to squeeze out shareholders. Under ongoing pressure from Elliott, Toyota raised its offer to 18,800 yen per share, valuing the subsidiary at 6.1 trillion yen overall, yet this revised price still sits below the current market capitalization, offering little reassurance.

The subsidiary's share price reversed earlier losses, climbing as much as 1.7% intraday to 20,000 yen. Under the proposed terms, the total cost for Toyota Group's privatization efforts would reach 5.4 trillion yen, with the acquisition of this specific subsidiary alone requiring 4.3 trillion yen. As the most vocal opponent of the deal, Elliott has presented an alternative independent proposal. It argues that the subsidiary could achieve a valuation exceeding 40,000 yen per share by 2028 through measures such as unwinding cross-shareholdings, integrating operations, optimizing capital allocation, and advancing governance reforms.

The subsidiary is one of the world's largest manufacturers of forklift trucks. It originated from a company founded by Toyota Group's founder, Sakichi Toyoda, to commercialize his invention of an automatic loom. His son, Kiichiro Toyoda, later established Toyota Motor, which is now the world's largest automaker. Akio Toyoda, Kiichiro's grandson, led Toyota Motor as CEO for 14 years before stepping down from that role in 2023 and becoming Chairman. As the Toyota empire has expanded, the network of cross-shareholdings within the group has grown increasingly complex. The Japanese government has recently intensified its calls for companies to unwind such arrangements, aiming to improve corporate governance, enhance transparency, and boost shareholder returns.