Renault agrees to lower Nissan stake in historic rebalancing

LONDON – Renault agreed to lower its stake in Nissan Motor, seeking to address a longstanding source of friction in their two-decade alliance to better compete in an industry moving to electrification and automation.

The partners will each retain a 15 per cent cross-shareholding with Renault transferring the remainder of its stake into a French trust for a coordinated sale when it’s commercially “reasonable” to do so, the companies said Monday. The plan still requires final approval from the companies’ respective boards. 

Renault, Nissan and junior alliance partner Mitsubishi Motors also plan to move forward via collaborations on specific projects, including in India, South America and Europe. Nissan will also invest in Renault’s carved-out electric vehicle and software business Ampere, which is set for a listing, with a goal of becoming a strategic shareholder. Bloomberg News first reported on the pair coming to an agreement on the rebalancing and key projects in principle last week. 

“A re-sized capital structure should help keep the alliance viable, maintaining synergies and opening up strategic opportunities on both sides,” Jefferies analyst Philippe Houchois said in a note. “Renault resisted pressure to sell at current levels and is now in position to better allocate excess capital for growth and shareholders.”

Renault fell 0.7 per cent in early Paris trading, while Nissan pared earlier gains to fall slightly.

The two sides have been inching closer to a decision since early last year. A final agreement will address a power imbalance that has long bothered executives in Japan. Although Renault holds the larger stake at 43 per cent with voting rights, Nissan makes more cars while owning a 15 per cent stake in the French carmaker with no voting rights.

The deal is crucial for Renault chief executive officer Luca de Meo to be able to move forward with his own strategy, involving a complex split in five different units, including Ampere. The French maker of Megane E-Tech and Austral cars wants to deepen ties with several other partners, including China’s Zhejiang Geely Holding and chipmaker Qualcomm.

The deal follows months of tense negotiations. The talks risked collapsing late last year due to sticking points on intellectual property and disagreement over Ampere’s valuation, people familiar with the situation have said. Nissan’s independent directors endorsed proposals from Renault earlier this month, they said. An event for the official announcement of is tentatively planned for Feb 6 in London, people familiar with the situation have said.

Dating back to 1999, the alliance was set up when Renault rescued Nissan with a cash injection to form one of the biggest auto partnerships in the industry. Over the years, rivalries and mutual suspicion mounted, culminating in the downfall of former leader Carlos Ghosn. Tensions also spilled over into Japanese-French politics when Renault contemplated merging the two companies, exacerbating resentment at Nissan.

Mounting electrification costs and rapid technological innovation mean Renault and Nissan can ill afford squandering some of the benefits deriving from the alliance, such as common purchases and car platforms. 

Continued collaboration on various industrial projects was a crucial condition for Renault to obtain approval of the alliance rebalancing from the French government, its most powerful shareholder. Renault has proposed work on 10 common projects, the people have said. BLOOMBERG