Japanese insurers and other financial companies are planning to sell around 500 billion yen ($3.1 billion) of shares in Honda Motor, as the unwinding of cross-shareholding practices accelerates. This move comes as the four insurers, including Tokio Marine Holdings, Sompo Holdings, and MS&AD Insurance Group, aim to bring all cross shareholding arrangements to zero. The sale of Honda shares by these insurers is a significant step in this process, indicating a growing trend in Japan.
Cross-shareholding, a practice in which companies hold shares in each other, has traditionally been viewed as a way to strengthen business ties. However, governance experts and foreign investors have criticized this practice for protecting management from shareholders and leading to lax governance. As a result, there is a push to eliminate cross-shareholdings and increase transparency in corporate governance.
The four insurers involved in this share sale have a notable stake in Honda, with holdings totaling more than 300 billion yen. Tokio Marine holds the largest stake at 161 billion yen, followed by Sompo Japan at 81 billion yen, Mitsui Sumitomo at 73 billion yen, and Aioi Nissay at 2.8 billion yen. These insurers have already announced their intention to reduce their cross-shareholdings and are now taking concrete steps towards achieving this goal.
Honda, on the other hand, holds shares in almost 50 companies, including Renesas Electronics, Mitsubishi UFJ Financial Group, and Tokio Marine Holdings. While Honda has not made any official statements regarding the insurers’ share sale, the automaker has plans to buy back up to 300 billion yen of its own shares during the current financial year. This buyback could help mitigate some of the impact from the sale.
The unwinding of cross-shareholding practices is gaining momentum in Japan, as evidenced by the insurers’ decision to sell Honda shares. This trend reflects a broader shift towards greater transparency and accountability in corporate governance. The sale of shares in a high-profile company like Honda by major insurers is a significant development and indicates a growing commitment to reforming traditional business practices.
The news of the share sale has already had an impact on Honda’s stock, as shares turned negative and ended the day down 1.45%. However, this move is seen as a necessary step towards creating a more transparent and shareholder-friendly business environment in Japan.
In conclusion, the planned sale of Honda shares by major Japanese insurers signals a further unwinding of cross-shareholding practices in the country. This move reflects a growing trend toward increased transparency and accountability in corporate governance. While this development may have short-term implications for Honda’s stock price, it is a significant step towards reforming traditional business practices and strengthening shareholder rights in Japan.
