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Shares of Toyota Industries experienced a significant drop of up to 13% on Wednesday following the announcement of Toyota Group's plan to take the company private through a 4.7 trillion yen ($33 billion) deal. The deal features a tender offer of $26 billion for shares at 16,300 yen each, a notable decline from Tuesday's closing price of 18,400 yen.

Investors reacted negatively to the tender offer, seeing it as undervalued compared to the recent market price. Arun George, a global equity research analyst, indicated that the offer price was below the midpoint of the valuation range suggested by independent financial advisers. George also highlighted that the special committee had attempted three times to have the offer improved but was rejected each time.

The privatization comes at a time of increasing regulatory and investor pressure on Japanese firms to dismantle cross-shareholding arrangements, which has been a common practice for protecting against acquisition threats. The Financial Services Agency of Japan has been advocating for a reduction in such arrangements. Toyota initially employed cross-shareholding in 2005 to safeguard itself.

To facilitate the deal, Toyota Group plans to establish a new holding company, with Toyota Fudosan, the real estate arm, investing approximately 180 billion yen. Additionally, Toyota Motor Chairman Akio Toyoda will inject 1 billion yen, while Toyota Motor itself will invest around 700 billion yen in non-voting preferred shares. The rest of the funding will come from loans provided by Sumitomo Mitsui Banking Corporation, MUFG Bank, and Mizuho Bank.

Industry analysts have a mixed perspective on the deal. Kei Okamura from Neuberger Berman suggested that in the mid- to long-term, unwinding cross-shareholdings and utilizing proceeds for growth investments could enhance capital returns for Toyota Group. However, the immediate investor reaction has been one of disappointment.

This strategic move also coincides with broader challenges in the global automobile market, including the imposition of 25% duties on automobile imports by U.S. President Donald Trump, which analysts believe could severely impact Toyota Motor due to its significant market presence in the U.S.

Toyota Industries, which was the founding entity of Toyota Motor, manufactures a diverse array of products such as forklifts, engines, electronic components, and stamping dies. Despite the initial negative market reaction, the deal is anticipated to position Toyota Group for long-term strategic benefits.