Renault Nissan Alliance Framework Deal Includes Stake Balancing

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.