Japanese financial entities such as Tokio Marine, Sompo, and two units of MS&AD are set to sell shares of Honda Motor worth 535 billion yen ($3.3 billion) to dissolve cross-shareholdings, according to a recent regulatory filing.
Mitsubishi UFJ and Mizuho, ranking as Japan's top and third-largest financial institutions, are also planning to join this sale, indicating a growing trend in the dissolution of cross-shareholdings as part of Japan's corporate governance enhancements. This move was previously reported by Reuters.
Cross-shareholding, a practice where companies hold shares in each other, has traditionally been viewed as a method to strengthen business relationships in Japan. However, governance specialists and foreign investors argue that it results in weak governance by shielding management from shareholder influence.
A secondary share offering involving a total of 10 financial entities is expected to reach 300 million shares, including over-allotment, with the pricing yet to be determined. Honda's shares closed at 1,791 yen on Thursday, which would value the offering at approximately 535 billion yen.
The four non-life insurers, including MS&AD Insurance subsidiaries Mitsui Sumitomo Insurance and Aioi Nissay Dowa, have previously announced plans to reduce their entire cross-shareholdings to zero within a few years, in reaction to a price-fixing scandal last year. Honda was among the top five cross-shareholding companies for these insurers, excluding Aioi Nissay Dowa Insurance, as per securities filings in March.
