(Bloomberg) — Honda Motor Co. has outlined plans for a long-drawn-out deal on par with its acquisition of Nissan Motor Co., as Japanese automakers struggle to stay competitive in the competitive global auto industry.
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On Monday, they announced a tentative agreement to create a joint holding company that would aim to list the shares in August 2026. Although their executives called the deal a merger, Honda will take the lead in forming the new entity and nominate the majority of its directors. Nissan’s partner Mitsubishi Motors Corp. may also participate in the deal.
Nissan shares fell as much as 7.3% at the open in Tokyo on Tuesday, while Honda rose 14.4%.
“Overall, it’s catching on,” says Neil Ganguly, partner and managing director at automotive and industrial consulting firm AlixPartners.
Honda and Nissan are both struggling to compete with growing local automakers in China, which overtook Japan as the world’s biggest auto exporter last year and are moving further ahead in 2024, he said at a press conference the goal is to be competitive by 2030.
“The synergies of the Honda-Nissan merger will take time to emerge if the deal closes in 2025,” said Tatsuo Yoshida, senior industry analyst at Bloomberg Intelligence Honda’s near-term benefits may be limited.”
Honda offered a sweetener for its shareholders by announcing that it plans to buy back up to 1.1 trillion yen ($7 billion) of its shares by this time next year.The upper limit of the buyback is 24% of the outstanding shares.
Honda’s bailout would prevent total disaster at Nissan and Mitsubishi Motors, whose reputations have soured since the arrest of their former chairman Carlos Ghosn in November 2018. A year after Nissan accused its longtime boss of financial wrongdoing, he fled Japan for Lebanon. .
Ghosn, 70, has denied all allegations and alleged that Nissan defamed him.
Mitsubishi Motors, which owns 24.5% of Nissan, has signed a preliminary agreement with Honda to explore joining the deal, saying it expects to confirm a decision by the end of January.
Honda shares closed up 3.8% in Tokyo on Monday, paring much of its loss since the deal was first rumored last week.Nissan and Mitsubishi Motors rose 1.6% respectively. and 5.3%.
A merger of the three companies would create one of the world’s largest automakers, though the group would still be smaller than Japan’s Toyota Motor Corp. Joining forces could also strengthen Chinese manufacturers, led by BYD Co., which is now the world leader in electric vehicles producers.
Nissan’s largest shareholder, France’s Renault SA, welcomed the statement from its longtime alliance partner, saying talks with Honda were still at an early stage.
Renault, which owns 36% of Nissan, also said in a statement that it would consider all options and continue to implement its strategy, which includes joint projects with Nissan.
Honda CEO Maybe said the merger with Nissan would generate billions of yen in incremental operating profits, though he did not offer a timetable for how the companies would deal with pressing issues such as plant closures. :
“Both companies will continue as wholly owned subsidiaries of the joint holding company with their respective brands,” Miebe said.
Honda’s share buyback replaces an earlier plan to buy back ¥100 billion of shares between November 7 this year and October 2025. The companies intend to close the deal in 2026.
Nissan has languished since Ghosn’s ouster, squandering its position as a front-runner in the transition to all-electric cars.
The growing popularity of locally-made EVs in China has left some foreign brands struggling for survival, with Honda and Nissan both forced to cut staff and production, while Mitsubishi Motors has pulled out of the world’s biggest car market.
Nissan also followed amid a resurgence in gas-electric hybrid popularity in the U.S. While Toyota dominates the powertrain segment, Honda is relatively well-positioned and could make a welcome boost.
The combination of falling sales in the US and China has been devastating for Nissan, forcing 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 turn Nissan around,” Nissan CEO Makoto Uchida said Monday.
Nissan was saved from its last financial crisis more than two decades ago when Renault stepped in with a cash injection and sent Ghosn to orchestrate the turnaround. An exiled executive from Beirut discussed the deal, telling Bloomberg Television last week that Nissan “ is in panic mode.”
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 the automaker is barely breaking even.
Nissan’s Uchida and Honda’s Mibe said they knew nothing about Hon Hai Precision Co., the Taiwanese iPhone maker known as Foxconn, being interested in taking over Nissan.
People familiar with the matter said last week that Foxconn had sent a delegation to meet with Renault.However, Foxconn has put its interest in pursuing Nissan before talks with Honda begin, one of the people said.
– With assistance from Craig Trudel and Chester Dawson.
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