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Ford's Mazda Share Sale Imminent?

Posted by: Ian Rowley on November 18, 2008

Another day, another auto stock sale? Reports in in Tokyo say Ford is about to confirm that it will reduce its stake in Mazda from 33.4% to 13.4%. Rumors of the sale have been circulating for weeks with a host of possible bidders mentioned, ranging from the Bank of Hiroshima to Toyota affiliate Denso and even Indian automaker Tata.

According to Japan’s Nikkei’s evening edition, trading companies Sumitomo and Itochu plus five nonlife insurance companies including Tokio Marine Holdings will buy up Ford shares. Denso, meanwhile, which is a Mazda supplier may “possibly” buy shares in Mazda, which may also buy some stock back itself. Mazda declined to comment on the speculation but said they will be back in touch if anything develops later today.

The sale is bigger news than yesterday’s announcement of GM’s sale of its 3.2% stake in Suzuki, given the important role Mazda occupies at Ford, especially in the design of passenger cars. Analysts reckon over half of the passenger cars developed at Mazda’s Hiroshima R&D hub will end up badged as Fords. That’s a figure which has risen steadily from 14.8% in 2000 and 42% today as Mazda’s role within the alliance had flourished. The official word, meanwhile, is that even with a reduced stake there is no reason for the relationship to sour. At Mazda’s most recent results, Mazda CEO said the relationship was as strong as ever and that “as far as I’m concerned, nothing is going to change.” Still, one wonders how Ford will have quite the same clout in Hiroshima. Today, three of the nine Mazda board directors are from Ford, including Executive Vice President Phil Spender, while until Imaki became CEO in 2003, the four previous Mazda CEOs were Ford execs, including current Ford Americas chief Mark Fields and CFO Lewis Booth.

If the reports are right, just as with GM and Suzuki, it’s not great timing from a cash-raising perspective. Mazda’s stock price was trading at around 550 yen (about $5.60 at today’s exchange) as recently as late August. In Tokyo trading today Mazda closed at 183 yen, which makes 20% worth about $505 million.

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