Exclusive: Toyota group companies plan $4.7 bln sale of Denso stake -sources

TOKYO, Nov 28 (Reuters) – Toyota (7203.T) group companies plan to cut their holdings in auto supplier Denso (6902.T) by selling about 10% of the company by year-end in a share sale likely worth around $4.7 billion, two sources familiar with the matter said.

Toyota Motor’s portion will represent almost half of the roughly 10%, with the total sale seen at about 700 billion yen ($4.7 billion) at current market prices, the two sources said.

Toyota Motor, which held some 24.2% percent of Denso as of the end of September, is expected to remain as the top shareholder in the company after the sale.

Denso separately plans to buy back some of its own shares in the open market to offset the potential hit to its share price, according to the sources, who declined to be identified because the matter is not public.

A Toyota spokesperson said it was not in a position to comment on Denso, adding the contents of the Reuters report of the share sale were not something it had announced itself.

A Denso spokesperson declined to comment.

Denso, a key Toyota supplier, is the world’s second-largest maker of automotive components.

Buyers of the shares are expected to largely be domestic investors, and the price has yet to be determined, the sources said.

The sale would mark the latest step by Toyota to unload some of its cross-shareholdings as it ramps up production of battery electric vehicles, a capital-intensive endeavour that requires funding for research and development as well as a factory-floor overhaul.

Toyota, the world’s top-selling automaker, in July said it would sell a stake worth about 250 billion yen in telecoms company KDDI Corp (9433.T) after unveiling a sweeping plan to improve the driving range and cut costs of battery electric vehicles.

Japanese companies have also been slowly unwinding their cross-shareholdings for years, a trend that has gotten fresh momentum from a push by the Tokyo Stock Exchange for companies to improve their use of capital.

Denso shares, which were down almost 4% before the news, extended losses after the Reuters report and fell as much as 6.8% on the day, closing 4.9% lower. Toyota shares finished little changed, as did the benchmark Nikkei 225 (.N225).

($1 = 148.2400 yen)

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Daniel Leussink is a correspondent in Japan. Most recently, he has been covering Japan’s automotive industry, chronicling how some of the world’s biggest automakers navigate a transition to electric vehicles and unprecedented supply chain disruptions. Since joining Reuters in 2018, Leussink has also covered Japan’s economy, the Tokyo 2020 Olympics, COVID-19 and the Bank of Japan’s ultra-easy monetary policy experiment.