(Bloomberg) — Honda Motor Co. has drawn up plans for a long-term deal that amounts to a takeover of Nissan Motor Co., as Japanese automakers struggle to keep pace in an increasingly competitive global auto industry.
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The two announced a tentative agreement on Monday to create a joint holding company aimed at listing shares in August 2026. While their executives described the deal as a merger, Honda will take the lead in forming the new entity and nominating a majority of its directors. . Nissan’s partner, Mitsubishi Motors, may also participate in the deal.
“On the face of it, it looks like an acquisition,” said Neil Ganguly, partner and managing director at automotive and industrial consultancy AlixPartners. “Scale certainly has advantages, and people should pay attention to it.”
Both Honda and Nissan are having a hard time competing with rising domestic automakers in China, which surpassed Japan as the world’s largest auto exporter last year and is moving further ahead in 2024. Honda CEO Toshihiro Mebe spoke of the level of difficulty ahead for the company. companies when he said during a press conference that their goal is to be competitive by 2030.
“The synergies of the Honda-Nissan merger will take time to emerge if the deal is concluded in 2025,” Tatsuo Yoshida, senior industry analyst at Bloomberg Intelligence, said in a note. “Nissan may be relieved of its financial pressures, while Honda’s near-term benefits may be limited.”
Honda offered something of an encouragement to its shareholders, announcing plans to buy back up to 1.1 trillion yen ($7 billion) of its shares by this time next year. The maximum limit for repurchase is 24% of the issued shares.
Saving Honda would avert a complete disaster for Nissan and Mitsubishi Motors, whose situations have deteriorated since the arrest of their former boss Carlos Ghosn in November 2018. Just over a year after Nissan accused its longtime leader of financial misconduct, he fled. From Japan to Lebanon. .
Ghosn (70 years old) denied all the accusations and claimed that Nissan had defamed him.
Mitsubishi Motors, which is 24.5% owned by Nissan, has signed a preliminary agreement to explore joining the deal with Honda, saying it expects to confirm the decision by the end of January.
Honda shares closed up 3.8% on Monday in Tokyo, reversing much of its losses since deal talks were first announced last week. Shares of Nissan and Mitsubishi Motors rose 1.6% and 5.3%, respectively.
Combining the three companies would create one of the world’s largest automakers, although the group would still be smaller than Japan’s Toyota Motor Corp. The joining forces could also strengthen its efforts to fend off Chinese companies led by BYD, which is now among the global players. Leading manufacturers of electric cars.
France’s Renault, Nissan’s largest shareholder, acknowledged its long-time alliance partner’s announcement, saying talks with Honda were still at an early stage.
Renault, which owns 36% of Nissan, also said in a statement that it will consider all options and will continue to implement its strategy, which includes joint ventures with Nissan.
Honda CEO Mebe said the merger with Nissan would generate billions of yen in additional operating profits, though he did not provide timelines. The 63-year-old CEO also did not address how companies will deal with pressing issues such as factory closures.
“The two companies will continue as wholly-owned subsidiaries of the joint holding company with their own brands,” Meby said.
Honda’s share buyback replaces a previously announced plan to buy back 100 billion yen worth of shares from November 7 of this year through October 2025. The large buyback is being launched now because Honda’s ability to repurchase shares is expected to be constrained during the period. that precedes that. For the deal, which the companies aim to close in 2026.
Nissan has declined in the years since Ghosn’s ouster, squandering its position as an early competitor in the shift to all-electric vehicles.
In China, the growing popularity of domestically manufactured electric vehicles has left some foreign brands struggling to survive. Honda and Nissan were forced to reduce staff and production, while Mitsubishi Motors withdrew from the world’s largest car market.
Nissan has also been on the defensive amid the resurgence in popularity of gas-electric hybrids in the United States. While Toyota dominates the powertrain segment, Honda is in a relatively good position and could provide a welcome boost.
The combination of falling sales in the United States and China has been devastating for Nissan, prompting the company to cut thousands of jobs, cut production capacity and cut its annual profit forecast by 70%.
“The partnership with Honda is not a sign that we are abandoning our plans to transform Nissan,” Nissan CEO Makoto Uchida said on Monday.
Nissan was rescued from its last financial crisis more than two decades ago, when Renault swooped in with a cash injection and sent Ghosn to coordinate the turnaround. The exiled executive commented on the deal talks from Beirut, where he told Bloomberg TV last week that Nissan was in a “state of panic.”
Speaking to the Foreign Correspondents Club of Japan via conference call on Monday, Ghosn noted that Nissan’s unit sales have fallen more than 40% since 2018 and that the automaker is barely breaking even.
Nissan Uchida and Mei Honda said they knew nothing about Hon Hai Precision Co., the Taiwan-based iPhone maker known as Foxconn, having interest in acquiring Nissan.
People familiar with the matter said last week that Foxconn had sent a delegation to meet Renault in France. However, Foxconn has suspended its interest in pursuing Nissan during negotiations with Honda, one of the people said.
-With assistance from Craig Trudell and Chester Dawson.
