Third Point buys stake in Suzuki Motor, sending shares soaring

US activist investment fund Third Point LLC has placed a bet on Japan's Suzuki Motor Corp potentially worth almost $1 billion citing the automaker's dominance in India, sending its shares to a lifetime high.

Third Point, led by Daniel Loeb, on Friday said Suzuki stock was cheap considering majority-owned Maruti Suzuki India Ltd holds nearly 50 per cent of a market where few own cars, and is valued higher than its parent.

"The company's greatest asset is its low-cost manufacturing process for vehicles for the emerging market consumer," Third Point said in a letter to clients.

A person familiar with the matter told Reuters Third Point had looked into Suzuki since March-April and bought a small stake. Japan regulation requires ownership of five per cent or over to be declared. A stake of 4.99 per cent, at the stock's highest price since March 1, would be worth around 121.6 billion yen ($979 million).

Third Point declined to specify the size, price or timing of its stake purchase. Suzuki declined to comment on specific shareholders.

The investment would be Third Point's latest in Japan after Sony Corp and Fanuc Corp. The fund pushed unsuccessfully for restructuring at Sony before selling out, while its criticism of Fanuc was followed by the factory robot maker raising dividends.

Its investment in the small car specialist coincides with management change. Last month, 85-year-old Chief Executive Osamu Suzuki named eldest son Toshihiro Suzuki as president. Suzuki's shares fell four per cent the following day.

In its Friday letter, Third Point did not make any demands of Suzuki but called its balance sheet "inefficient." It also said a "paralysing" dispute over Volkswagen AG's 20 per cent stake in Suzuki was nearly over, after which Suzuki could make better use of its cash.

The Third Point news gave a bump to shares already on upward trend over the past three years as Maruti drives group earnings.

In April-June, a jump in Maruti's income helped Suzuki post its highest-ever first-quarter operating profit.

An India sales boost and strong rupee pushed up operating profit 8.3 per cent to 55.16 billion yen, versus the 51.03 billion yen average estimate of eight analysts polled by Thomson Reuters. Net profit, which excludes Maruti, fell 15.5 per cent.

"What this says is that our dependence on Maruti is very high," said a Suzuki spokesman. "That in a way reflects our reality."

Suzuki's stock rose as much as 4.7 per cent after the Third Point news. It ended the day up 3.4 per cent ahead of earnings at its highest-ever close of 4,467.5 yen. The broader Tokyo market fell 0.1 per cent.