Suzuki Plans $1.8 Billion Bond Sale, Cancels Most VW SharesCraig Trudell and Ma Jie
Convertible bond sale to help fund first India factory
Third Point's Loeb urged Suzuki to cancel stock bought from VW
Suzuki Motor Corp. plans to sell 200 billion yen ($1.8 billion) of convertible bonds and cancel most of the stock it bought back from Volkswagen AG last year, as the Japanese automaker expands in India following a failed alliance.
Suzuki will sell the bonds primarily to fund the 185 billion rupee ($2.8 billion) factory it’s building in India’s western Gujarat state, according to a statement filed Monday to the Tokyo stock exchange. The automaker also will cancel 70 million treasury shares, or 12.5 percent of outstanding stock, to boost returns for investors after ending its partnership with Volkswagen in September, the company said in separate statement.
President Toshihiro Suzuki, who took over from his father and Chairman Osamu Suzuki in June, has been under pressure both to press ahead with expansion in the company’s largest market and reward shareholders who lost out on any value from an alliance with Volkswagen, which failed to yield any joint projects. Daniel Loeb, whose hedge fund Third Point LLC disclosed it bought a stake in the carmaker in August, told reporters the automaker should cancel all the stock bought back from Volkswagen.
Suzuki acquired 111.6 million shares from the German automaker last year. The Japanese company said Monday it will hold a maximum of 50 million treasury shares, mainly to exercise the convertible bond sale.
The convertible bond deal is Japan’s biggest since November 2011, according to data compiled by Bloomberg. Suzuki is marketing both tranches of the deal, the 2021 notes and 2023 notes, at a conversion premium of 30 percent to 40 percent, according to a person with knowledge of the matter. Nomura Holdings Inc. is the sole bookrunner.
Some proceeds from Suzuki’s bond sale also will be used for research and development on safety technology and spending to bolster its dealer network in Japan.
Suzuki won approval from shareholders in December to set up the car plant in India. Investing in more production capacity on its own frees up its 56 percent-owned unit Maruti Suzuki India Ltd. to expand its local sales network and build a new premium brand.