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Published 14:37 IST, July 4th 2024

Japanese insurers and banks drive $3.3 billion Honda share sell-off in governance shake-up

Financial groups like Tokio Marine, Sompo, and units of MS&AD aim to dissolve cross-shareholdings, aligning with Japan's corporate governance reforms.

Reported by: Business Desk
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Honda shares sale
Honda shares sale | Image: Shutterstock

Honda shares sale: Japanese insurers and banks are set to sell shares of Honda Motor worth $3.3 billion, according to a regulatory filing. This move, involving major financial groups like Tokio Marine, Sompo, and units of MS&AD, aims to dissolve cross-shareholdings and align with Japan's corporate governance reforms.

Japan unwinds cross-shareholdings

Leading financial giants Mitsubishi UFJ and Mizuho are also joining the sale, indicating a growing momentum in unwinding these cross-shareholdings, traditionally used to strengthen business relationships in Japan. However, critics argue that such practices can weaken governance by shielding management from shareholder influence.

The sale, which includes over-allotment options, will involve 300 million shares at a price yet to be determined. Honda's shares closed at 1,791 yen on Thursday, valuing the transaction at approximately 535 billion yen.

In response to a pricing scandal last year, the four non-life insurers, including MS&AD subsidiaries Mitsui Sumitomo Insurance and Aioi Nissay Dowa, have committed to completely eliminating their cross-shareholdings over the next few years.

Honda plans buybacks

Honda, on the other hand, has already announced plans to repurchase up to 300 billion yen of its own shares this fiscal year, though no additional buybacks were detailed in Thursday's announcement. According to securities filings from March, Honda ranked amongst the top five companies in terms of cross-shareholdings for insurers, excluding Aioi Nissay Dowa Insurance.

(With Reuters Inputs)

Updated 14:37 IST, July 4th 2024