Nissan reportedly ready to scrap $96b Honda merger talks
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The news: Nissan’s board has decided to scrap merger talks with Honda after the two Japanese automakers were unable to agree on acceptable terms, rejecting a deal worth over USD60 billion ($95.58 billion), the Nikkei reported citing unnamed sources.
Talks soured after Honda proposed making Nissan a subsidiary rather than pursuing the initially planned joint holding company, the sources said.
Nissan informed Honda on Tuesday of its intention to halt talks, and the board met Wednesday to discuss ditching the memorandum of understanding signed in December regarding the integration, the paper said.
In statements to media, Nissan and Honda said the Nikkei report did not reflect official company announcements and that they planned to determine and disclose their future direction by mid-February.
The numbers: Following the reports, Nissan’s stock dropped more than 4%, triggering a temporary Tokyo Stock Exchange halt, while Honda’s shares rose over 8%.
The failed talks raise questions about Nissan’s ability to recover independently as it undergoes a turnaround plan, including cutting 9,000 jobs and 20% of its production capacity.
The context: The move to end a deal that would create the world’s third-largest automaker comes after Renault, Nissan’s alliance partner, reportedly urged Nissan last week to negotiate a higher premium for its stake.
Nissan, however, is in a weaker financial and competitive position and vulnerable to potential US-Mexico tariffs. As such, analysts suggest Nissan may need to find a foreign partner for a new deal.
What they said: "Investors may get concerned about Nissan's future (and) turnaround," Morningstar analyst Vincent Sun said. "Nissan also has a larger risk exposure to U.S.-Mexico tariffs than Honda and Toyota."
Fumio Matsumoto, chief strategist at Okasan Securities said: "For Nissan, it was naive to imagine they could go into this as equals. If you’re going to do it, it’s best to make clear who’s on top."
The sources: Nikkei, Financial Times, Reuters
