TOKYO Toyota Motor Corp (7203.T), the world's largest automaker, said it would buy out the rest of minivehicle unit Daihatsu Motor Co 7262.T - an all-stock deal worth about $3 billion and part of its strategy to strengthen its push into compact cars for emerging markets.
The companies intend to develop Daihatsu into a global brand as they focus on growing markets for compact cars, noting that entry-level car markets were expanding due to economic development and that vehicles were becoming smaller due to environmental and traffic concerns.
Acquiring full control of Daihatsu, of which Toyota currently owns 51.2 percent, will allow it to better leverage the lower-cost brand and enable Daihatsu to more easily adopt next-generation technologies developed by Toyota.
"We see this as the perfect opportunity to cement our relationship with Toyota, and, by doing so, to embark on a new period of growth, and to elevate the Daihatsu brand to a global standard," Daihatsu said in a statement.
Toyota will acquire the remaining Daihatsu shares by swapping 0.26 of its own shares for each Daihatsu share. Daihatsu shares will be delisted after July 26.
Daihatsu specialises in 660 cc vehicles and produces models including the Mira and the Cast, while also supplying car bodies and engines to Toyota and Fuji Heavy Industries Ltd (7270.T).
It competes fiercely with Suzuki Motor Corp (7269.T) in Japan, where both automakers each hold about 30 percent of the minivehicle market.
But as minivehicles sales slump at home due to a rapidly ageing society and a lack of interest in car ownership among young people, the automakers have been looking to expand further into overseas markets.
Daihatsu has a 16.2 percent market share of the passenger car market in Indonesia, where it manufactures the Ayla and other vehicles in a joint venture with Astra International. In Malaysia, it operates a joint venture which has a market share of around 32.5 percent.
It also exports to Europe and North America, where some of its models have been sold under Toyota's Scion brand targeted at the youth market.
Global sales for Daihatsu slid 13.3 percent in 2015, the weakest sales performance in the Toyota group last year, which also includes the Toyota and Lexus brands and truck maker Hino Motors Ltd (7205.T).
The announcement comes days after Toyota denied a media report that it is discussing possible tie-ups with Suzuki from a variety of angles, including cross-share holdings.
(Reporting by Naomi Tajitsu in Tokyo; Additional reporting by Saeed Azhar in Singapore; Editing by Edwina Gibbs)