(Bloomberg) -- Denso Corp. announced plans to buy back its own stock, marking a milestone in the Toyota Motor Corp. group’s push to unwind its intricate web of cross-held shares.
Denso, a major supplier to Toyota and a number of Japanese carmakers, announced Thursday it plans to buy back up to ¥450 billion ($2.9 billion) worth of its own shares, or as many as 280 million shares. Shortly after that, engine supplier Toyota Industries Corp. said it was going to sell all of its 185 million shares in Denso, which represents a 5.9% stake in the company.
Denso also said it would cancel up to 7.64% of its own shares on Nov. 29. Shares in the company initially rose as much as 5.8% following the news before giving up their gains. They were down as much as 3.6% as of 1 p.m. Japan time.
The announcements from companies linked to the world’s largest automaker mark a significant step in the government’s years-long campaign to pressure companies to unwind their vast web of strategic shareholdings. The push is aimed at improving corporate governance and nurturing competition.
Underscoring the cross-holding network, Denso also holds 6.4% of Toyota Industries’ shares, according to data compiled by Bloomberg, while Toyota Motor owns 37% of Toyota Industries and 25% of Denso.
In September, Toyota Motor Corp. raised its share buyback to ¥1.2 trillion as it looks to untangle cross-held shares among its business partners, including Denso and Toyota Industries.
Denso’s move comes after the firm cut its full-year guidance on Thursday, to ¥550 billion from ¥692 billion for the fiscal year ending March 2025. Net sales between April and September were ¥3.47 trillion, down 1.1% from the previous year and falling short of estimates.
Currency fluctuations and a decline in sales and production across Japan and Asia have also weighed on profit for major automotive suppliers.
Toyota’s sales in Japan and China took a hit last month as it felt the delayed impacts of domestic scandals and recalls abroad. The company saw sales in Japan fall nearly 17% this year between January and September, and production in China drop almost 18% during the same period, due to intense competition from BYD Co. and other local brands.
Stagnant demand for new cars and a rise in the popularity of electric vehicles has made it a challenge for Toyota and its suppliers to make the shift toward software-heavy EVs.
Related story: Toyota Raises Buyback to ¥1.2 Trillion, Citing Share Levels
(Adds Toyota Industries announcement and details, background.)
©2024 Bloomberg L.P.