Categories: Media Moves

Coverage: Renault and Nissan in talks to combine

Renault SA and Nissan Motor Co. are in talks to merge, seeking to solidify their two-decade-old alliance under a single stock as an unprecedented shift toward electric and shared cars transforms the industry.

David Welch, Ed Hammond, Kiel Porter and Jie Ma of Bloomberg News had the story:

A deal would end the current alliance between the companies and marry them as one corporation, said the people, who asked not to be identified as the details aren’t public. Renault currently owns 43 percent of Nissan while the Japanese carmaker has a 15 percent stake in its French counterpart. Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity, the people said.
A merged giant would be a more formidable rival for Volkswagen AG and Toyota Motor Corp., allowing the partners to better pool resources as the industry shifts toward new-energy vehicles, autonomous driving and car-sharing services. While the alliance of Renault and Nissan has brought savings, the fragmented ownership structure has prevented the companies from reaping full benefits from their union.
“Size matters in the auto industry,” said Janet Lewis, an analyst at Macquarie in Tokyo. “The concern has always primarily been the French government, and somewhat Japan, because both France and Japan like to keep their national champions.”
The parties are discussing a transaction in which Nissan would essentially give Renault shareholders stock in the new company, the people said. Nissan shareholders would also receive shares in the new company in exchange for their holdings, they said. The automaker may maintain headquarters in both Japan and France.

Nathan Bomey of USA Today reported that the French government would likely have to approve the deal:

Renault owns about 43% of Nissan, which owns about 15% of Renault. They also work closely together and share oversight under chairman Carlos Ghosn.
Complicating matters is the French government’s 15% ownership stake in Renault, which would require political approval for a deal to occur.
It’s not clear how the deal would affect the third player in the global alliance, Japanese automaker Mitsubishi. But the alliance bragged that it collectively sold more vehicles than any other automaker in 2017.
For American consumers, the deal likely would have little impact.
But for Nissan and Renault, the deal may be necessary to help them afford the increasing costs to develop future technologies, such as electric cars and self-driving vehicles.

Martin Baccardax of TheStreet.com reported that Renault’s shares hit a 10-year high on the news:

Renault shares were marked 4.3% higher at €93.08 by mid-morning in Paris after having hit a ten-year high of 100.38 each earlier in the session. Thursday’s move takes that stock’s year-to-date gain to 15.7% compared to a 1.6% decline for the Stoxx 600 Europe Automobiles & Parts index.
Ghosn, who earned the nickname “Le Cost Killer” from the French media during his early tenure at Renault, was granted a surprise four-year extension to his leadership role last month and pledged to make the company’s alliance with Nissan “irreversible”.
The French government backed the new term, as well as Ghosn’s 20% pay cut, with President Emmanuel Macron saying he wanted “a road map safeguarding the interests of the company, the alliance and all of the French industrial sites” and finance minister Bruno Le Maire telling France’s CNews television the state would accept a “merger in the future” of Renault and Nissan.
Ghosn told analysts last month the financial structure of a permanent alliance would have to be agreed by both the French and Japanese governments and warned that it would not be possible if France retained significant influence over Renault.
“I don’t see how the Japanese side is going to accept further steps with the French state as a major shareholder” he told analysts.

Chris Roush

Chris Roush was the dean of the School of Communications at Quinnipiac University in Hamden, Connecticut. He was previously Walter E. Hussman Sr. Distinguished Professor in business journalism at UNC-Chapel Hill. He is a former business journalist for Bloomberg News, Businessweek, The Atlanta Journal-Constitution, The Tampa Tribune and the Sarasota Herald-Tribune. He is the author of the leading business reporting textbook "Show me the Money: Writing Business and Economics Stories for Mass Communication" and "Thinking Things Over," a biography of former Wall Street Journal editor Vermont Royster.