Toyota won approval Tuesday for a controversial new share sale that it defended as a way to lure stable, long-term investors, overcoming stiff opposition from some institutional shareholders overseas.
The world’s biggest automaker said 75 percent of shareholders voted in favour of the plan that would see it sell up to 50 million of the new shares, which must be held for five years and will not be publicly traded.
Largely restricted to Japanese investors, the new “Model AA” shares carry voting rights and will be priced at a 20 percent premium on Toyota’s common shares, which closed at 8,395 yen ($68) in Tokyo.
Dividends paid on the new shares would rise from 0.5 percent to 2.5 percent by the end of the five-year holding period when investors could convert them to common shares or Toyota would repurchase them, it said.
Later Tuesday, the company said it would buy back as much as 600 billion yen ($4.9 billion) in stock to guard against dilution from the new share issue.
Toyota, which booked a record $18 billion profit in its latest fiscal year, said the share structure would lure longer-term investors and help it fund expensive research work, particularly on next-generation technology such as fuel cell cars.
The vote comes weeks after Japan formally adopted a corporate governance code that was hailed as ushering in a new era of transparency for investors.
US-based advisory Institutional Shareholder Services said the new shares would reduce investors’ influence over management decisions.
“It is difficult to escape the impression that the company wants to increase stable and silent investors by replacing common shareholders with Model AA shareholders,” it added.
The California State Teachers’ Retirement System, which announced it would vote against the plan, said it was “not in the best interests of all Toyota common stock shareowners — particularly foreign shareowners”.
We do “not believe that the creation of a dual class of common stock aligns with the ‘one share, one vote’ principle”, it said.
“Toyota’s Model AA Class Shares would be unlisted and offered only in Japan, thus hindering investors outside of Japan from participating.”