Jan 30, 2023
Renault Agrees to Lower Nissan Stake in Historic Rebalancing
(Bloomberg) -- Renault SA agreed to lower its stake in Nissan Motor Co. in moves aimed at solving longstanding frictions in their decades-long alliance and better competing in the rapidly transforming auto industry.
Renault will reduce its ownership of Nissan to 15% by placing the rest of its current 43% shareholding in a French trust, the companies announced Monday. The trust will sell those shares — at the moment worth about ¥544.1 billion ($4.18 billion) — in a coordinated and orderly process likely to play out over several years.
The plan, which still requires final approval from the companies’ respective boards, will allow Renault to push on with carving-out its electric-vehicle and software business called Ampere, which the company wants to list in an initial public offering later this year.
The deal follows months of tense negotiations that nearly collapsed late last year due to sticking points on intellectual property and disagreement over the valuation of Ampere, people familiar with the situation have said. The alliance dates back to 1999, when Renault rescued Nissan with a cash injection and the two formed one of the biggest auto partnerships in the industry. Rivalries and mutual suspicion mounted over the years and came to a head when former leader Carlos Ghosn openly contemplated merging the two companies, contributing to his downfall.
Renault declined 3.9% as of 3 p.m. Monday in Paris trading, paring recent gains. Nissan’s stock closed down 0.7% in Tokyo.
Renault has been making headway on a turnaround under Chief Executive Officer Luca de Meo, which was made all the more challenging by its fraught exit from Russia, its second-biggest market this time a year ago. Its shares have soared more than 70% since early March 2022.
“A re-sized capital structure should help keep the alliance viable, maintaining synergies and opening up strategic opportunities on both sides,” Jefferies analyst Philippe Houchois said in a note. “Renault resisted pressure to sell at current levels and is now in position to better allocate excess capital for growth and shareholders.”
What Bloomberg Intelligence Says
Renault’s widely expected announcement that it will sell down its 43.3% Nissan stake to 15% potentially unlocks €4 billion before tax to help smooth a transition to BEVs and make the Alliance more equitable. Nissan will also invest in Ampere, Renault’s pure EV business, which will assist BEV economies of scale. The unwanted 28.4% Nissan stake will be transferred into a trust and divested when “commercially reasonable.”
— Michael Dean, BI automotive analyst
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Renault, Nissan and junior alliance partner Mitsubishi Motors Corp. said they plan to collaborate on concrete projects going forward, including in India, South America and Europe. Nissan also will invest in Renault’s Ampere business, with the goal of becoming a strategic shareholder, according to the statement. Bloomberg News first reported on the pair coming to an agreement on the rebalancing and key projects last week.
The projects are likely to be “deal sweeteners in order to get Nissan over the line on the Ampere IPO,” Bernstein analyst Daniel Roeska wrote Monday in a note.
Nissan may invest $500 million to $750 million for a stake of about 15% in Ampere, people familiar have said. Securing buy-in from a global partner is crucial for de Meo to move forward with his strategy to split Renault into five different units, which includes a separate entity for the company’s legacy combustion-engine business with new partner Zhejiang Geely Holding Group Co.
Nissan’s independent directors endorsed proposals from Renault earlier this month, and the two are tentatively looking to host an event to release details on Feb. 6 in London, people familiar with the planning have said.
The two sides have been working to this point since de Meo first floated plans to break up Renault’s business early last year. A final agreement will address a power imbalance that’s long bothered executives in Japan. Whereas Renault has a 43% stake and voting rights, Nissan owns just 15% of its smaller partner and lacks voting rights.
Mounting electrification costs and rapid technological innovation mean Renault and Nissan can ill afford squandering benefits deriving from the alliance, such as common purchases and car platform-sharing.
Continued collaboration on various industrial projects was a crucial condition for Renault to obtain approval of the alliance rebalancing from the French government, its most powerful shareholder. Renault has proposed work on 10 common projects, the people have said.
--With assistance from Tsuyoshi Inajima and Reed Stevenson.
(Updates with value of stake in Nissan that Renault will sell in the second paragraph.)
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