Deepika Agrawal 
Japanese automaker Toyota Motor and two of its affiliates will sell a total of 256,373,400 shares in auto components maker Denso in a sale worth 589.1 billion yen (USD 4 billion) at Wednesday’s closing share price. The other sellers are sister companies Toyota Industries and Aisin. The move comes as Toyota is looking to cash in on stakes in affiliates as it plans to ramp up development and production of fully electric vehicles.
The share sell will be Japan’s second biggest this year and the largest in the global auto industry in more than a decade, according to LSEG data. As of the end of September, Toyota Motor held about 24% of Denso’s total shares while Toyota Industries owned 9% and Aisin had 2%. Now, the Toyota plans to lower its holdings to about 20%, Toyota Industries to 5% while Aisin is considering selling all of its shares.
Denso to buy back some shares
The components maker would buy back some 125 million shares sold by the Toyota Group as it looks to offset the market impact of the sale. Denso’s shares closed up 0.9% on Wednesday, having lost 4.9% a day earlier after the news was first reported.
Cross-shareholding tradition
Notably, Japanese companies follow a tradition of taking stakes in affiliates and business partners. This practice is known as cross-shareholding, however, companies have now come under pressure to unwind those holdings to improve their use of capital. According to investors, such cross-holdings weaken capital efficiency of a company. While companies have been slowly unwinding their holdings for years, the trend gained momentum after the Tokyo Stock Exchange in March urged companies to make better use of their capital.
Toyota Motor holds more than 20% of shares in Denso, Aisin and Toyota Industries, while both Denso and Toyota Industries also hold shares in Toyota Motor. Earlier in July, the automaker had said that it would sell 250 billion yen worth of shares in telecommunications operator KDDI. Auto parts makers Aisin and JTEKT had announced that they will eliminate their cross-holdings in the future.
