Toyota marks a turning point for activists in Japan

Just two years ago, more than half of companies in Japan’s benchmark Tokyo Stock Price index were, by one rough measure at least, cheap. They had market capitalisations that were less than their net assets. In most large markets, such a sweeping discount would have meant aggressive restructurings or buybacks. In Japan, it was business as usual.

That is now changing. Activists are scoring wins across Japan, obtaining higher tender offer prices, record share buybacks and governance changes at blue-chip companies.

Foreign activists have had their eye on Japanese companies for more than a decade. Elliott helped to push Toshiba into governance change and a ¥2tn take-private deal in 2023. At Dai Nippon Printing, activist pressure was followed by large share buybacks and capital policy changes. Third Point’s campaign at Sony improved disclosure and the company’s focus on its core businesses. But these wins were rarely swift or straightforward.

The latest campaigns are producing faster and more visible concessions. Take Toyota Industries, for example. Toyota Group had formally announced a plan to launch a tender offer for the affiliate from which it originally sprung in June last year at Y16,300 a share, an 11 per cent discount to the day’s closing price. After opposition from Elliott, Toyota raised the offer twice, bringing the deal value to about Y6tn ($38bn).

This acceleration is happening because boards are less shielded than they used to be. Cross-shareholdings no longer guarantee friendly votes, since many of those stakes have been reduced under governance reforms. Even where they remain, the companies involved are under pressure to justify them financially. Local investors are becoming more willing to challenge management. Meanwhile, regulators have made clear that persistently low valuations require action.

The clearest impact has been on Toyota Industries’ stock. Shares have gained more than 60 per cent in the past year, moving towards the revised tender offer. For Toyota Motor, paying a higher price will carry a short-term cost. Yet responding to shareholder pressure reduces governance risk. That should support Toyota Motor’s valuation over time.

This is an important precedent because of its deal size and the clarity of the outcome. Unlike the drawn-out battles of the past, this was a direct dispute over price. Once a valuation gap can be challenged and corrected at that level, it can happen anywhere.

june.yoon@ft.com