Japan's Suzuki Motor Corp said on Sunday it will buy back the 19.9 percent stake it sold to Volkswagen AG after an international arbitration court settled a dispute between the automakers over their failed partnership.
Suzuki filed for international arbitration in November 2011, after Volkswagen (VOWG_p.DE) refused to sell back the shares in Suzuki it acquired in January 2010 for 1.7 billion euros ($1.90 billion).
The stake was worth some $3.8 billion at Friday's closing price.
Both companies said they welcomed the clarity offered by the ruling from the International Court of Arbitration of the International Chamber of Commerce, which partially upheld the German company's counterclaims of breach of contract.
"It used to feel as if a small bone were stuck in my throat," Suzuki Chairman and Chief Executive Osamu Suzuki told a news conference. "I feel so refreshed now."
Suzuki said it foresees no impact on its full-year earnings.
VW said in a statement it would not know the impact on its balance sheet or profits until it has coordinated the sale of the Suzuki shares. "We have already retained an investment bank and will in the next few days consult with the bank and our lawyers over the next steps to be taken."
U.S. hedge fund mogul Daniel Loeb urged Suzuki to cancel the shares it buys back, saying the Japanese automaker has enough cash on hand and should avoid issuing equity which would hurt existing shareholders.
Loeb sent Suzuki shares soaring early this month by disclosing his Third Point LLC fund held a stake. He said at the time the stock was cheap and that the expected resolution of the VW dispute would allow it to make better use of its cash.
In a phone call with a small number of media outlets early on Monday Japan time, Loeb said Suzuki should buy the shares from the German giant at a price not too far from the current price.
Suzuki said it expects to buy back its shares at a "reasonable" price, though it did not specify what that price would be.
Takaki Nakanishi, chief executive of Nakanishi Research Institute, which specializes in the automotive industry, said it was "highly likely it will buy back at the Friday closing price."
"For Suzuki, this isn't that much money," he added. Suzuki had nearly 1 trillion yen in cash reserves as of the end of March.
Loeb did not mention other specific measures he expected from Suzuki but said he saw a cancellation as a "first next step". He said he would be happy to meet with management to discuss other "shareholder-friendly steps" to better allocate capital, adding that he had no plans to sell the shares yet.
"At this valuation we're happy to continue holding," he said. Third Point has not disclosed the size of its Suzuki stake. Japanese regulation requires ownership of 5 percent or more to be declared.
VW held 111.61 million Suzuki shares as of March 31, worth 463 billion yen ($3.81 billion) at Friday's closing price of 4,151.5 yen.
The two carmakers agreed to tie up in December 2009, pledging to cooperate on technology such as hybrid and electric cars and on expanding in emerging economies.
But the union soured as Suzuki accused VW of withholding hybrid technology it promised to share. VW, in turn, objected to Suzuki's purchase of diesel engines from Fiat (FIA.MI).