Reports reveal that Honda’s proposal to make Nissan a subsidiary has had an adverse impact on the intended Honda-Nissan merger
Mergers are often challenging, as there are financial complexities, leadership conflicts and varying work cultures. A relevant example is the Honda-Nissan merger, which hasn’t moved forward as per expectations. Although there is no official confirmation, reports indicate that Nissan could scrap the merger talks with Honda, Japan’s 2nd largest carmaker by volume.
Nissan’s opposition to subsidiary call
As per reports, Honda had proposed Nissan to function as a subsidiary post the merger. However, Nissan has opposed this move, as it is not in line with the original goals of the merger. Sources reveal that the Nissan board had discussed the matter and has decided to scrap the merger talks. However, there is no official confirmation as of now.
As reported earlierthe Honda-Nissan merger was planned to benefit both brands. It would have created improved competencies that would have helped Honda and Nissan to improve their finances and offerings. As part of the merger talks, Nissan was asked to buy out Renault’s stake in the company.
Renault has around 36% stake in Nissan. It includes shareholding of 18.7%, managed via a French trust. While Renault does not seem to have any issues with the Honda-Nissan merger, buying out Renault’s stake (valued at around Rs 31,457 crore) will be a major financial hurdle for Nissan. The stakes are high for both Honda and Nissan, as there’s intense competition from EV manufacturers like BYD.
The Honda-Nissan merger will create the world’s third-largest auto company, valued at around $60 billion (Rs 522,000 crore). Honda is currently the second largest carmaker in Japan, with a market valuation of $51.90 billion. Nissan’s market valuation is around 1/5th of that number.
Impact on stock markets
Markets have reacted to a Nikkei business daily report that had talked about the stalled merger talks. Nissan stocks fell by more than 4% at the Tokyo Stock Exchange. Trading was subsequently suspended for the stock. In comparison, Honda’s stocks gained more than 8%. It appears that even shareholders are not so excited with the Honda-Nissan merger plans.
In separate statements, Honda and Nissan stated that the Nikkei report has no connection with any official statements issued by the companies. Both brands assured that they are willing to make the merger work and progress is likely by mid-February. Even Renault’s spokesperson has stated that there is no official confirmation that merger talks have ended. Nissan is currently undergoing a turnaround plan.
Its success will play a major role in determining the progress of the merger plan. Nissan is aiming to reduce its workforce by around 9,000 employees and global capacity by 20%. Uncertainties in the Honda-Nissan merger talks come at a time when the threat of US tariffs looms. Nissan would be hit harder from U.S.-Mexico tariffs in comparison to Honda and Toyota.
It appears that the proposal to make Nissan function as a subsidiary will be a challenging part of the merger talks. It may be relevant from Honda’s perspective, as the company has to secure its own interests. Sources also reveal that Mitsubishi, which was earlier willing to be part of the merger, may not be joining.
