Four of Japan’s leading property and casualty insurers, alongside other financial firms, are preparing to divest approximately 500 billion yen (USD 3.1 billion) worth of shares in Honda Motor, according to three individuals familiar with the matter. This move comes amid an accelerated unwinding of cross-shareholding practices.
The insurers involved in this share sale include Tokio Marine Holdings, Sompo Holdings, and two units of MS&AD Insurance Group. Together, they will be reducing their holdings in Honda, as confirmed by the sources who spoke on condition of anonymity due to the sensitive nature of the information.
Additional financial institutions are also expected to decrease their stakes in Honda, making the total expected divestiture around 500 billion yen based on Honda’s current market valuation, the sources added.
Honda is poised to officially approve the insurers’ share sale in the near future, according to the sources. The automaker has previously announced plans to buy back up to 300 billion yen of its own shares during this fiscal year, a move aimed at mitigating the impact of the upcoming divestiture.
In response to inquiries, Honda declined to comment specifically on the insurers’ plans, stating that such information had not been officially disclosed by the company. Representatives from Tokio Marine and MS&AD also refrained from commenting, while Sompo did not immediately respond to requests for comment.
These insurers, including MS&AD’s Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance units, have publicly committed to eliminating all cross-shareholding arrangements. Honda, except for Aioi Nissay Dowa Insurance, ranks among the top five companies in terms of cross-shareholding for these insurers, according to March securities filings.
This divestiture of Honda shares by prominent stakeholders underscores the growing trend in Japan towards dismantling long-standing cross-shareholding practices. Originally intended to solidify business relationships, these practices have drawn criticism from governance experts and foreign investors for potentially hindering shareholder rights and governance standards.
As of March, the four insurers or their parent companies collectively held over 300 billion yen worth of Honda shares. Tokio Marine held 161 billion yen, Sompo Japan held 81 billion yen, Mitsui Sumitomo held 73 billion yen, and Aioi Nissay held 2.8 billion yen, according to securities filings.
In total, these insurers held approximately 9 trillion yen worth of cross-shareholdings as of March, with other notable holdings in companies such as Toyota Motor, Shin-etsu Chemical, and Itochu.
In December, Japan’s Financial Services Agency issued a business improvement order to these insurers after finding evidence of price fixing in corporate insurance fees, instructing them to reduce their cross-shareholdings.
Following the report of the impending share sale, Honda’s stock price saw a decline in late trading on Tuesday, falling by 1.7% to 1,727 yen after earlier reaching a high of 1,801 yen.