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. Last Updated: 07/27/2016

Renault Agrees to Buy 35% of Nissan




PARIS -- French carmaker Renault, saying it is "convinced of the merits of a strategic alliance,'' announced Tuesday its offer to buy a 35 percent stake in Japan's debt-ridden Nissan Motor Co.


"Renault is offering Nissan to start exclusive negotiations on the conditions of such an alliance,'' said a brief statement by Renault that followed a board meeting.


"Renault is now convinced of the merits of a strategic alliance between Renault and Nissan,'' the statement said.


A main condition of the alliance would be Renault's acquisition of an equity stake of Nissan of "approximately 35 percent,'' the statement said.


Such an alliance - which would create the world's fifth-largest automaker - would give Renault a premiere distribution system in Asia as well as access to Nissan's superior technology in engines, suspension, batteries and fuel cells.


Nissan, in turn, would get a desperately needed cash infusion, better European distribution and management talent.


Nissan's board is scheduled to meet Friday to approve the new alliance. However, Renault's plans would have to be approved by a Renault Employee Council.


Renault is expected to invest about $5 billion in Nissan in exchange for the more than one-third stake in the company, according to a Nissan executive in New York. The executive spoke Monday on condition of anonymity.


With a plus 33.4 percent stake, Renault would have veto power over Nissan's decisions.


Under the deal, Renault would appoint a chief operating officer to Nissan who would handle the Japanese automaker's day-to-day operations and have a seat on Nissan's board, according to Tuesday's edition of the Nihon Keizai Shimbun, Japan's leading financial newspaper.


Renault is expected to name two additional members to Nissan's board. It was unclear Monday whether Nissan would increase the size of its board, or simply replace existing directors with Renault's picks.


"It's time for Renault to start looking off shore,'' said Jay Woodworth, an independent auto analyst in Summit, New Jersey. "I'm not sure this is the right deal for them, but it's something that's very interesting.''


He said Nissan's real estate, some of which the company has owned for more than 100 years, is vastly undervalued on its balance sheet, and that the company is actually worth two- to -three times its $7 billion stock market value.


"The real estate holdings give it tremendous value, but its hard to convert that into cash to feed huge cash flow deficits,'' Woodworth said.


Yoshikazu Hanawa, Nissan's president, and Louis Schweitzer, Renault's chairman, hammered out the agreement over the weekend in Paris. Nissan turned to Renault after negotiations with DaimlerChrysler collapsed last week.


Nissan also is said to be negotiating with Ford Motor Co. The Dearborn, Michigan-based automaker reportedly is weighing a bid for a 33-percent-or-more stake in Nissan, according to The Wall Street Journal.