Japan is only theoretically fertile territory for stock market takeovers, as the Toyota thought experiment reveals. Japan, declares tourist after tourist, investor after investor, is red hot. The yen is tumbling, the shopping is amazing, the stock market is flying, the sushi is cheap. It is also, perhaps, the only place in the world right now where you can buy a globally successful $20bn company for free.
And glorious though that notionally knockdown pricing sounds, it may yet spoil an important element of the party.
Like all good tricks, this so-far-hypothetical $20bn great gratis grab takes a bit of setting-up. For a start, to be the lucky buyer you have to be Toyota Motor — global carmaker supreme, Japan’s biggest company and embodiment of the reality that, while governance reform is happening apace, it is certainly not happening everywhere.
And second, you need to exist in a stock market that has, for decades, tolerated the self-evidently problematic phenomenon of listed companies’ “cross-holdings” of equity stakes in one another. Traditionally held as symbols of business friendship between companies, these stakes have acted as barriers against pushier shareholders and allowed poor management an ill-deserved cushion of complacency. True, the networks have been unwinding in recent years under government and shareholder pressure, but some pretty remarkable anomalies still exist.
Last week a large audience of visiting fund managers who had gathered in Tokyo took part in a thought experiment. Consider Toyota Industries — the world’s biggest manufacturer of forklift trucks and a major global player in weaving machinery. It is also, via the magic of cross-holdings, the single largest private sector owner of Toyota Motor shares. Toyota Industries’ 7.31 per cent stake in the parent (whose stock price has roughly doubled over the past decade) is currently worth $16.4bn, or roughly 85 per cent of the total market value of Toyota Industries.