March 8, 2018 / 12:38 AM / 12 days ago

Flush with cash, Nissan may get chance to weaken France's grip on Renault partnership

TOKYO (Reuters) - After years of opposing France’s influence on its partnership with Renault SA (RENA.PA), Nissan Motor Co (7201.T) may finally have a chance to deepen ties with its French counterpart if the government agrees to sell its 15 percent stake in Renault.

The carmakers are in talks with government officials over proposals by Renault-Nissan boss Carlos Ghosn for Nissan to buy the bulk of France’s equity stake in Renault, people close to the matter told Reuters on Wednesday.

That would see Paris give up influence at Renault and the French carmaker relinquish control over Nissan.

France sold a 4.73 percent stake in Renault late last year, paring back its holding after raising it to 20 percent in 2015, a move which triggered a power struggle with Ghosn.

Nissan and its automaking group, which also includes Mitsubishi Motors Corp (7211.T), have said the alliance has “no plans to change the cross-shareholding ratios of its member companies”. Any discussion about a share transaction involving Renault, Nissan or the French state was speculation, it added.

But a source familiar with the situation has said that the deal was “just a hurdle” Renault and Nissan would need to clear for the automakers to elevate their partnership towards a possible full merger.


Industry experts said that if the French government was warming to the idea of shedding more of its stake in Renault, it may be a good time for Nissan to act, given that it is flush with cash after a strong run of profit.

“The Macron government has said that it is not in favour of holding large corporate stakes. Meanwhile, Nissan has been building up cash following a run of strong profitability,” said Hitoshi Kaise, partner at consulting firm Roland Berger.

“This could be a rare opportunity for Nissan to remove the French government’s influence over the alliance.”

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Still, he warned that such an investment would come when Nissan and other global automakers are investing heavily in self-driving cars and electric vehicles to compete with tech companies in new transportation services.

Since recovering from the global financial crisis, Nissan has boosted its cash holdings to around 1.12 trillion yen ($10.5 billion) as of the end of 2017, which would be more than enough to scoop up 15 percent of Renault shares, worth around 4.2 billion euros ($5.20 billion) based on its closing price on Wednesday.


Any deal still faces significant hurdles - not least its extreme political sensitivity in France - and has yet to win government approval, sources have told Reuters. To do so, it must balance French and Japanese interests, avoiding the appearance of a takeover.

    The group has been underpinned by cross-shareholdings under which Renault holds 43.4 percent of Nissan, including voting rights, while Nissan owns 15 percent of Renault with no voting rights. The Japanese automaker also has a 34 percent controlling stake in Mitsubishi Motors.

    Under Tokyo market rules, Renault would lose all voting rights on its Nissan holding if the Japanese carmaker raised its Renault stake to 25 percent or more.

    Since Renault rescued Nissan from the brink in 1999, the automakers have wrestled intermittently with plans for full mergers that have foundered on objections from France, Renault’s biggest shareholder.

    But with Ghosn, the alliance’s main architect, now beginning his final term as Renault CEO, the government has been pressing for a tie-up to secure the future of Renault-Nissan, the world’s largest carmaking group by sales last year.

    Closer ties could come as the automakers aim to double their annual savings to 10 billion euros by 2022 from 2016 levels and focus on closer convergence in areas including engineering, manufacturing and purchasing.

    Nissan shares closed 0.8 percent higher on Thursday, while Renault shares traded 0.6 percent lower at 1145 GMT.

    ($1 = 0.8073 euros) ($1 = 106.0600 yen)

    Additional reporting by Norihiko Shirouzu in Beijing; Editing by Stephen Coates/Keith Weir

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