Absorbing Tomen: buying non-auto scale in one move (2006)

How a single-track trader became a full-line house

At the centre of this decision is a trader whose sales tracked the volume of Toyota’s production and exports making up for the non-auto businesses it had always been thin in — by taking them in, whole, from outside. To grow steel, chemicals, food, textiles and electronics from scratch would have taken a long time. By taking Tomen — a general trader then in the middle of restructuring — into itself in stages, Toyota Tsusho bought that time. Spending six years from the 2000 capital tie-up to the 2006 merger, supporting its counterpart with capital while drawing the businesses together, it moved with a caution that avoided the burden of absorbing a still-recovering company all at once.

That the merger ratio was 1-to-0.069 shows the union was not one of equals but closer to a rescue by the fitter side. Taking a partner in at a discount for its weakness is a pattern that acquires businesses cheaply while shifting the burden of their recovery onto oneself. Even so, the non-auto domains it came to hold — chemicals, food, electronics and African distribution — became the pillars that would set Toyota Tsusho apart from a Toyota procurement house. In this mid-2000s combination one can see the starting point of the long shift away from dependence on Toyota’s unit volume and toward a trader that earns on quality.