GAM Slams ‘Incomprehensibly Low’ Honda Unit Sale Price, Weighs Legal Action
(Bloomberg) — Swiss asset manager GAM Holding AG said the discount price at which Honda Motor Co. is selling a controlling stake in a subsidiary to Samvardhana Motherson International Ltd. is “incomprehensibly low,” as it steps up its opposition to the transaction.
“We are at this time stage considering legal options to stop this deal and seek a higher deal,” GAM Chief Executive Officer Albert Saporta said in an email Wednesday. The firm also sent open letters to Honda and its subsidiary, Yutaka Giken Co., which supplies car parts.
Honda is the second major Japanese automaker to face pressure from activist investors over a related-party transaction. Elliott Investment Management is urging shareholders to reject the Toyota group’s bid to buy out Toyota Industries Corp., arguing this month’s sweetened offer still “substantially undervalues” the company and that it can achieve greater value on its own.
In Honda’s deal, the automaker is selling a 50% controlling stake in Yutaka Giken for ¥1,470 per share, while Motherson is offering ¥3,024 a share to buy out remaining minority shareholders. Yutaka Giken shares climbed 2.8% to ¥3,280 on Wednesday.
“The only plausible explanation is that minority shareholders aren’t being told the whole story,” GAM said in its letter to Honda. “This transaction leaves several unanswered questions which raise serious concerns about conflicts of interest.”
Honda declined to comment. Its shares fell 2.3% to a two-month low of ¥1,500.
In a separate open letter last month, GAM called on Yutaka Giken to withdraw the deal or secure a “significantly higher” price for minority shareholders, saying simple takeover metrics imply a value of at least 50%-70% more than the current offer.
Motherson announced plans in August to buy an 81% stake in Yutaka Giken for about ¥27 billion ($176 million). Honda will retain a 19% stake in the company, which manufactures metal components and assemblies including rotors and stator assemblies for motors, drive systems, brake systems and thermal management systems.
The Indian car parts maker will also buy an 11% stake in Shinnichi Kogyo Co., another Honda subsidiary.
(Updates with Honda declining to comment in sixth paragraph, share prices in seventh.)
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