After a decade of cross-ownership, Renault and Nissan are in talks to speed up drive toward full merger

After a decade of cross-ownership, Renault and Nissan are in talks to speed up drive toward full merger

By David Welch, Ed Hammond, Kiel Porter and Ma Jie

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

Renault currently owns 43% of Nissan while the Japanese carmaker has a 15% stake in its French counterpart. Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity, cementing the current alliance between the companies and marry them as one corporation, said the sources.

After a decade of cross-ownership, Renault and Nissan are in talks to speed up drive toward full merger

A merged giant would be a more formidable rival for Volkswagen and Toyota, 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,” she said.

The parties are discussing a transaction in which Nissan would essentially give Renault shareholders stock in the new company, the sources said.

Nissan shareholders would also receive shares in the new company in exchange for their holdings. The automaker may maintain headquarters in both Japan and France.

In Ireland, Nissan had over 8% of new registrations in February, and Renault had a 5.7% share. That compares with shares for Toyota of 10.5%; of 9.9% for Volkswagen; of 9.7% for Ford; and a 7% share for Skoda.

Renault shares closed almost 6% higher in Paris, giving the company a market value of about €29bn. Nissan shares are down slightly, giving it a valuation of 4.6 trillion yen (€34.7bn).

Getting a deal done could prove very difficult. The French government owns 15% of Renault and may be reluctant to relinquish control over its stake or have its position watered down.

Both the French and Japanese governments would also have to approve a deal and may have strong opinions on where the combined company is domiciled.

One possibility would be to base the company in London or the Netherlands, where cross-Atlantic carmaker Fiat Chrysler is based.

Fiat Chrysler maintains headquarters in both Italy and the US.

No final decisions have been made and the talks, which have been ongoing for several months, may not result in a deal, the sources said. Reuters reported earlier this month that Nissan was in talks to buy the bulk of the French government’s stake in Renault, citing unidentified people.

The Renault-Nissan alliance said at the time any discussion about a share transaction involving the parties was “pure speculation.”

Mr Ghosn has pledged to cement Renault’s partnership with Nissan, saying in February that the companies would devise a plan to “make the alliance irreversible”.

The 64-year-old relinquished the chief executive officer role at Nissan last year to focus on the partnership. The companies are seeking to double synergies to €10bn by 2022 from 2016.

In April, Mitsubishi — in which Nissan is the largest shareholder — will further integrate with the alliance.

Bloomberg. Additional reporting Irish Examiner

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