(BFM Bourse) – The two Japanese groups are currently discussing a merger, according to Japanese media Nikkei. For Renault, such a coupling would have several virtues. In particular that of facilitating future sales of Nissan shares from the diamond group.
More than three years after the creation of Stellantis, born from the marriage between Fiat Chrysler and Peugeot SA, another automobile giant could see the light of day via a merger.
On Tuesday evening, the Japanese business daily Nikkei reported that the manufacturer Nissan and its domestic rival Honda would “enter into negotiations” with a view to such an operation. The two groups could soon sign a memorandum of understanding, according to close sources cited by the media.
The two companies could place themselves under the umbrella of a holding company and would consider including Mitsubishi in their team. The latter manufacturer is part of the Renault-Nissan-Mitsubishi alliance in which Nissan owns 34% of Mitsubishi, Nissan owns 15% of Renault, and Renault holds 35.71% of Nissan (17% directly and 18.7% via a trust responsible for selling securities).
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Nikkei writes that Honda and Nissan are considering this merger to pool their resources and be better able to fight competition from Tesla and Chinese players. The daily explains that such an operation would also aim to avoid the risks of a takeover of Nissan by the Taiwanese group Foxconn.
The distribution of shareholders of the potential new entity and the terms of the merger will be decided later, adds the media.
Renault leaps into Paris
In a press release, the two groups did not really deny this press information. “Media reports that Honda, Mitsubishi and Nissan are considering an integration of their businesses are not based on any announcement from our company,” Nissan said in a statement.
“As announced in March and August of this year, Nissan, Honda and Mitsubishi are considering various possibilities for future collaboration, but no decisions have been made,” the company added.
Honda also released a statement that said exactly the same thing as Nissan’s.
On the Tokyo Stock Exchange, Nissan shares soared, gaining 23.7% on Wednesday, while Honda, on the contrary, fell 3%.
According to estimates from Oddo BHF, given the market capitalizations of the two groups, Honda shareholders would own 84% of the capital of the new group and those of Nissan around 15%. Jefferies arrives at the same result in its calculations, and notes that the group (or rather the alliance) formed by Honda, Mitsubishi and Nissan would represent more than eight million vehicles sold, thus integrating the top 3 in the world.
Rethinking the alliance
A significant butterfly effect is observed on the Paris Stock Exchange following this press information: Renault shares are climbing. The car manufacturer’s stock rose 6% around 10:50 a.m., marking the largest increase in the CAC 40.
As previously written, Renault still holds nearly 36% of Nissan’s capital. An increase of more than 20% by the Japanese manufacturer on the Tokyo Stock Exchange therefore necessarily has a positive impact through a simple translation effect.
But beyond this simple, purely mechanical impact, a Nissan-Honda merger with a reinforced enlargement to Mitsubishi would have other advantages for Renault.
Remember that the diamond group and Nissan overhauled their alliance in the fall of 2023, which notably resulted in the end of shared structures, such as the cessation of their joint purchasing company. This new situation has, above all, involved a rebalancing of cross-shareholdings between the two groups, a long-term wish of the Japanese side.
Initially, Renault owned 43.4% of Nissan. The French group decided, at the end of 2023, to only directly own 15% of the capital of its Japanese ally and to place the balance in a trust, responsible for selling this remaining share. In this way Renault finds itself on an equal footing with Nissan which also holds 15% of its capital.
Since then, the company led by Luca de Meo has carried out several transfers of blocks of shares to reduce its stake to 35.71%.
This decision by Renault to offload Nissan shares to free up cash and finance its investments was well received. But in a recent note, Bank of America wrote that future sales of Nissan shares were more complicated.
Share sales made easier
However, a merger between Nissan and Honda would facilitate such an operation. Renault would thus benefit from greater liquidity to sell the Renault shares held by its trust, and could sell them to “Honda or other investors”, explains Jefferies.
“We consider that there is a relatively positive cross-reading for Renault, which could possibly find in these merger projects a potential buyer for a significant part of its remaining stake in Nissan (35.7%, or a value of almost 3 billion euros today) or at least a partial exit scenario”, adds Oddo BHF.
Renault could notably use a “swap” mechanism, exchanging its 15% stake in Nissan (which would represent 5.8% of the new Nissan-Honda group, according to Jefferies) for the 15% that Nissan holds in its own capital. Renault could then choose to cancel this approximately 15% of its own capital.
Among other potential benefits, Jefferies points out that Renault would hold “a smaller minority stake in the new entity, with improved synergies and return prospects, including continued cooperation and contract manufacturing for Nissan and Honda, the latter having ended its production in Europe.
Oddo BHF also sees another positive aspect: Honda could, ultimately, become a small customer of Ampere, the manufacturer’s division specializing in software and electrical technologies.
“In the longer term, questions regarding shared platforms and existing collaboration projects may arise,” the broker continues. “But as the rationale behind the merger plans between Japanese equipment manufacturers is to increase their size, we do not think this is a short-term issue and could even be seen as a new opportunity “, concludes Oddo BHF.
Julien Marion – ©2024 BFM Bourse
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