Honda shares are poised for their best day in more than 16 years thanks to a stock buyback plan and Nissan deal

Shares of the Japanese automaker Honda They were on track to have their best day in 16 years later Announcement of buyback of up to 1.1 trillion yen ($7 billion) of its shares on Monday amid merger talks with… April.

April Honda said they have started Formal merger negotiationsWhich could catapult them into the world’s third-largest automaker by sales.

Honda also announced the buyback of 24% of its issued shares by December 23 of next year. Its shares were last up 15.51%, and will have their best day since October 2008 if gains continue. Nissan shares fell by more than 1%.

The Honda-Nissan deal will focus on sharing knowledge and resources, achieving economies of scale and creating synergies. Honda CEO Toshihiro Mebe said. A holding company will be established as the parent organization for both Honda and Nissan, and will be listed on the Tokyo Stock Exchange.

“These two companies operate in the same market, they have very similar business images, and they have very similar products,” Hakan Dogu, president of Alagan Mobility Solutions, told CNBC on Tuesday.

“The new management faces a major challenge to differentiate the product range and also expand the business,” he added.

Discussions are scheduled to end in June 2025.

Mitsubishi, Nissan’s strategic partner, has been given the opportunity to join the new group and is expected to make its decision by the end of January 2025.

Honda I mentioned 1.382 trillion yen operating profit for the full year through March 2024, compared to 568.7 billion yen for Nissan. The total value of the automakers is approximately $54 billion, with Honda’s market capitalization contributing a larger share of $43 billion.

Analysts suggested The potential merger stems from Nissan’s financial difficulties and the restructuring of its long-term partnership with French company Renault.

In its latest quarterly report Nissan announced plans to cut 9,000 jobs Reducing its global production capacity by 20%.

— CNBC’s Jenny Reed contributed to this report.