[attach id=452388 size="medium"]Suzuki Motor chairman and chief executive officer Osamu Suzuki pausing for a drink of water during a news conference in Tokyo, Japan. Photo: Issei Kato/Reuters[/attach]

Japan’s Suzuki Motor Corp. said on Sunday it would buy back the 19.9 per cent stake it sold to Volks-wagen AG after an international arbitration court ordered the German automaker to sell its holding.

Their planned partnership soured with the Japanese automaker accusing VW of seeking to control it and filing for arbitration in November 2011. VW’s stake was acquired in January 2010 for €1.7 billion.

Both companies said they welcomed the clarity offered by the ruling from the International Court of Arbitration of the Inter-national Chamber of Commerce, which partially upheld the German company’s counter-claims of breach of contract.

Suzuki said it foresees no impact on its full-year earnings.

The Japanese automaker’s shares climbed as much as 4.6 per cent early on Monday, before trading flat. That still outperformed a 1.2 per cent decline in the benchmark Nikkei average.

“While we believe investors might react favourably to news of the share buyback, we basically think all of this is already priced in,” JPMorgan analyst Akira Kishimoto wrote in a report.

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. US hedge fund mogul Daniel Loeb urged Suzuki to cancel the shares it buys back, saying the automaker has enough cash on hand without issuing equity.

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, Loeb said Suzuki should buy the shares 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 elaborate.

Takaki Nakanishi, chief executive of Nakanishi Research Institute, which specialises in the automotive industry, said it was “highly likely it will buy back at the Friday closing price” of €3.4 billion.

“For Suzuki, this isn’t that much money,” he added. Suzuki had nearly one trillion yen ($8.25 billion) in cash reserves at 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 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.

The two automakers 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 alliance soon faltered. In addition to Suzuki’s fears that VW was attempting to control it, VW objected to Suzuki’s purchase of diesel engines from Fiat.

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