Renault Nissan Alliance Framework Deal Includes Stake Balancing
Renault Nissan Alliance Framework Deal Renault Nissan Japanese French Mitsubishi Luca de Meo Bernstein Carlos Ghosn
Neil Winton
Renault and Nissan agreed a framework deal to modernize their alliance which included the French company reducing its 43% holding in Nissan to 15% while the Japanese company’s 15% stake in Renault would gain voting rights.
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Forbes
Renault and Nissan agreed a framework deal to modernize their alliance which included the French company reducing its 43% holding in Nissan to 15% while the Japanese company’s 15% stake in Renault would gain voting rights.

France has a 15% stake in Renault.

The balance of Renault’s shares would be placed in a trust, according to Reuters.

Those details would be in line with investor expectations, as the long drawn-out negotiations appeared close to a conclusion.

More news is expected by February 6.

Investment researcher Bernstein liked what it saw, having recently raised its rating on Renault shares.

“The joint announcement is in-line with our expectations and reports over the past week. Untieing the gordian knot between Nissan and Renault was a key reason for our upgrade of Renault to “Outperform” last week,” Bernstein said in report.

“The remaining 28.4% of Nissan shares will be placed in a French trust with economic rights still accruing to Renault. There seems to be a general understanding that the ‘excess’ shares could be sold off over time,” Bernstein said.

Renault bailed out Nissan in 1999 after the Japanese company teetered on the edge of bankruptcy. Since then Nissan has prospered but has become impatient with the ownership structure which left it with little voting power to decide the strategic direction of the alliance. Mitsubishi Motors was added to the grouping. Progress in the negotiations was knocked sideways when former alliance chairman Carlos Ghosn was arrested by Japanese authorities in November 2018.

Renault CEO Luca De Meo’s own “Renaulution” strategic plan wants to split the company into five autonomous companies, and details of how Nissan will be included in this will be expected when the official announcement comes. Renault’s planned split is -

· Ampere - electric vehicles and their software.

· Power, including internal combustion engines (ICE) and hybrids, hydrogen. Project Horse with Geely of China for ICE and hybrids.

· Alpine electric sports cars.

· Mobilize - car sharing and mobility services with China’s Jiangling Motors.

· The Future is Neutral - recyling.

The plan includes raising operating profit margins to 8% by 2025, and to more than 10% in 2030, compared with 5% expected this year.

Bernstein said Nissan will invest in Ampere.

“Under its strategic plan, Renault is planning to list its EV and Software arm, “Ampere”, and Nissan has agreed to become a strategic shareholder. Recent reports called for a 15% participation. Today’s announcement, though, did not have any incremental details. We would expect Renault to continue on its path to IPO (float off) Ampere later in the year,” Bernstein said.

“One stumbling block for Renault’s strategy has been joint IP between Nissan and Renault, which Renault would like to transfer to Ampere and the ‘Horse’ JV with Geely. Today’s announcement did not comment on any intellectual property agreements and we would welcome further clarification if any bottlenecks remain in Renault’s strategy implementation,” Bernstein said.

Investment bank UBS agreed the news was as expected.

“There is little new compared to what was discussed in the press over the past few months. The main piece of new information to us relates to Renault being still able to receive dividends from the Nissan stake linked to the 28.4% it will transfer to a French trust. There is no indication of a joint event that might occur next week, as mentioned in the press several times, apart from "The Alliance members plan to make an announcement immediately after the board approvals,” UBS said in a statement.

“The trust structure also implies that Renault will not receive any cash proceeds, at least in the near term, in our view, and no details are provided on the conditions related to a disposal. Having said this, we think few investors were expecting Renault to return cash over the next few months post a reduction of its Nissan stake,” UBS said.

Renault shares tanked in February after Russia invaded Ukraine from about $37 to $21, but have been recovering steadily since then, closing at €37.27 Friday. Renault generated 10% of its revenue and around 12% of its operating margin in Russia in 2021. It wrote off the business in 2022.

Reuters BreakingViews columnists Pierre Briancon and Katrina Hamlin said the deal marks the end of Renault’s dominance of Nissan.

“It addresses festering governance issues. But without a clear leader, decision-making may become fuzzier,” they said.

“But there are limits to the reset. Decision-making between two equal partners with separate management will be trickier without a strong joint chairman or chief executive. That may make it harder to resolve squabbles over future investments or technology sharing, for example. The months of negotiations required even to reach this small step forward do not suggest a smooth ride ahead,” they said.