Nissan, Renault agree to overhaul alliance, putting themselves on equal footing

Nissan, Renault agree to overhaul alliance, putting themselves on equal footing

(Reuters) – Nissan Motor Co and Renault SA have agreed to a sweeping revamp of their two-decade-old automaking alliance that will put them on an equal footing and see the Japanese company invest in Renaults new electric business.

Comments Jp morgan

We see todays announcement as a positive signal for both entities to improve…industrial collaboration across many regions, particularly avoiding costs in Europe and Latam.

We understand Renault is able to ring fence its own technology within the alliance allowing the firm to collaborate also with other external partners beyond the Renault Nissan alliance.

We believe the company by rebalancing its close share-holding with Nissan will also create the necessary trust among the alliance to improve the industrial collaboration albeit, still holding 28.4% of Nissan shares in a French trust.

“Overall we welcome this step which will enhance the industrial collaboration within the alliance.”

Jefferies

A re-sized capital structure should help keep the Alliance viable, maintaining synergies and opening up strategic opportunities on both sides.

“A re-balanced Alliance should help reduce valuation discounts but management still needs to reassure about value leakage in planning the IPO of Ampere and future minority investments.”

JON WITHAAR, HEAD OF ASIA SPECIAL SITUATIONS, PICTET ASSET MANAGEMENT

Whilst it was clear for some time that a restructuring of the alliance was needed given the competing cultural and business differences between the companies, it doesnt seem likely that there will be a significant change in the relationship other than an orderly disposal of the Renault holding in Nissan to put the relationship on an equal economic footing.

The ability to exercise voting rights (by Nissan) is welcome from a corporate governance perspective and acts as a guardrail to keep interests aligned between the two parties.

“The announcement is neutral to mildly positive in the mid to long term. Ultimately it means that a disorderly unwind of the alliance has been avoided which is a positive. Overall it shows the changes that the auto makers are being forced to adopt to tackle the electric transition. Companies are now more willing to partner in order to achieve scale and technological edge than in previous cycles.”

MASAYUKI KUBOTA, CHIEF STRATEGIST AT RAKUTEN SECURITIES

It should be seen from a short- and long-term perspective.

“Over the short term, its possible there may be selling (of Nissan shares) due to a worsening of supply and demand. But over the long run, the normalisation of the capital relationship will raise the amount of freedom Nissan has in terms of management, making it easier to adopt a strategy that focuses on the United States, China and emerging markets.”

GREGOIRE LAVERNE, APICIL ASSET MANAGEMENT

“The market is waiting for more details…In a way it marks the failure of the first version of the alliance.”