Toyota takes full control of DT Dobie after Sh5.4bn deal

Japanese conglomerate Toyota Tsusho has taken full control of motor vehicle dealers DT Dobie and CICA Motors after buying all the shares in their parent company CFAO Group.

The multinational in December 2012 acquired a 97.81 per cent stake in CFAO for €2.2 billion (Sh243.7 billion) and last month bought the remaining shares for €50.5 million (Sh5.4 billion), squeezing out minority shareholders in the trading company.

“CFAO will become a wholly-owned subsidiary of Toyota Tsusho and will no longer be listed on the Euronext Paris stock exchange,” Toyota said in a statement.

The buyout of DT Dobie and CICA adds to its full ownership of Toyota Kenya, with the multinational now controlling a total market share of 24.5 per cent in Kenya’s new vehicle market.

Full acquisition of DT Dobie and CICA had raised concerns that the local subsidiaries could be merged to gain unfair advantage including through cross-selling of a wide variety of vehicles.

A dominant auto dealer can also lock out its rivals from major tenders by riding on economies of scale to ask for relatively lower prices for its vehicles.

Toyota has in the past, however, said Toyota Kenya and the other dealers will continue to be managed separately despite their common ownership.

This helped it get approval for the takeover from the Competition Authority of Kenya (CAK) at a time when Zambia had rejected the deal and Tanzania had sought a close scrutiny of the buyout amid fears it could stifle competition in those markets.

When Toyota first bought into CFAO, the three dealers had a combined market share of 40 per cent. General Motors East Africa (GMEA), which sells Isuzu commercial vehicles and Chevrolet passenger cars, is currently the largest dealer with a 34.5 per cent market share.

Besides Toyota and CICA, Toyota also inherited pharmaceutical distribution firms EPDIS Kenya and Laborex Kenya and a 32.5 per cent stake in assembly firm Kenya Vehicle Manufacturers (KVM) as part of the global deal.

Toyota, DT Dobie and CICA now have seven franchises combined including rights to distribute Mercedes Benz, Volkswagen, Jeep and Hino.

This makes the combined operation one of the most diversified alongside CMC Holdings which deals in Ford, Suzuki, Maruti, MAN and UD among others.

Expand footprint

Toyota says the acquisition of CFAO is aimed at helping it expand its footprint in Africa’s automotive and pharmaceutical distribution business.

The takeover came at a heavy price, with some global automakers terminating their distribution agreements with CFAO’s subsidiaries in several markets including Kenya.

The manufacturers see Toyota Tsusho, a trading company, as promoting the interests of its affiliate company Toyota Motor Corporation at their expense.

DT Dobie, for instance, lost the Nissan franchise to Crown Motors in 2014. Toyota is, however, betting on the acquisition of new franchises to grow sales, insisting that it is separate from its affiliate which manufactures Toyota cars and commercial vehicles.
DT Dobie got a reprieve when it took over the Volkswagen franchise from CMC Holdings, adding to its dealership in Mercedes, Jeep and Great Wall brands.

The Volkswagen franchise recently got a boost after the government committed to buying 300 of the Polo Vivo cars annually as they roll out of the Thika-based assembly firm KVM.