Toyota Motor Corp will buy back ¥806.8 billion (US$5.2 billion or RM24.3 billion) worth of its stock from major Japanese banks and insurers as part of a broader push to unwind strategic shareholdings with financial partners.

Mitsubishi UFJ Financial Group Inc, Sumitomo Mitsui Financial Group Inc, Tokio Marine Holdings Inc and MS&AD Insurance Group Holdings Inc are tendering their shares at ¥2,781 apiece, an 11% discount to their closing price on Tuesday, Toyota said in a statement.

The buybacks are part of a ¥1 trillion repurchase plan announced by Toyota in May, and are also aimed at satisfying the Japanese government’s push to get big enterprises to unwind cross-held shareholdings forged over decades to cement business relationships. While that has brought some measure of accountability for management and improved governance, the biggest banks and businesses had been slow to unwind their holdings. Given its scale and significance, the Toyota deal could trigger a broader wave of looser equity ties in Japan.

“For shareholders, its good news,” said Seiji Sugiura, a senior analyst for Tokai Tokyo Intelligence Laboratory Co. “Everyone has been waiting ever since Toyota announced its buyback.”

For Toyota, the goal is to increase shareholder returns and free up funds to invest in efforts to become carbon neutral, the company said in a statement Tuesday.

In June, Bloomberg News reported that Mitsubishi and Sumitomo were planning to start divesting their stakes in Toyota, worth ¥1.32 trillion. In addition to MS&AD Insurance and Tokio Marine, Sompo Holdings Inc holds a significant stake in in Toyota. If all of them were to divest shares, the total would top ¥3 trillion.

The banks and insurers are said to be planning to divest their Toyota shareholdings over an extended period of time lasting a few years, dramatically reducing their stakes or divesting them entirely.

The sale follows a banner year for Toyota, which saw shares climb 26% this year on top of a 43% rally in 2023.

Some Japanese insurers have already hinted at plans to significantly reduce or eliminate their cross-shareholdings, which authorities believe are a cause of price fixing with corporate clients.

Toyota is also looking to unwind its shares in its various business partners. Earlier this year, the carmaker announced plans to sell part of its stake in parts supplier Aisin Corp. Denso Corp and Toyota Industries Corp also said they’ll unwind their holdings in Aisin.

In November, the carmaker said it would reduce its stake in electric parts maker Denso to 20% from 24%. Prior to that, Toyota committed to selling some of its stake in telecommunications company KDDI Corp for ¥250 billion. While the sales serve the purpose of freeing up money that can be used to fund Toyota’s shift to electric vehicles, they also be used toward buybacks.

  - Bloomberg