The proposed $58 billion merger between Honda and Nissan is now in jeopardy, as a majority of Nissan’s board members have opposed the deal following Honda’s attempt to gain full ownership of the automaker.
The two companies began discussing a potential merger in December, but tensions escalated after just over 40 days. Honda has been facing increasing pressure from both internal stakeholders and shareholders to take complete control of Nissan in an effort to revitalize the struggling car manufacturer, according to three sources familiar with the situation.
A revised proposal, submitted to Nissan over the weekend, deviated from the original plan, which had envisioned a jointly owned holding company. This previous structure would have allowed Nissan to retain its brand identity and decision-making authority.
Negotiations became contentious early on as the companies struggled to agree on asset valuation and equity distribution, insiders revealed. Nissan’s executives were reportedly surprised by Honda’s latest proposal, which was presented as a "take it or leave it" offer. Despite this, an official decision is expected to be made later this month.
The merger discussions were initially sparked when Taiwanese electronics manufacturer Foxconn expressed interest in purchasing part of Renault’s stake in Nissan late last year. Renault, which has been gradually reducing its investment in Nissan after restructuring their long-term alliance in 2023, played a significant role in shaping the negotiations.
During a board meeting on Wednesday, some members raised concerns about Foxconn’s potential involvement. However, the primary opposition stemmed from resistance to Nissan becoming a Honda subsidiary, according to an individual with direct knowledge of the discussions.
Another source close to the situation suggested that Honda’s abrupt and "aggressive" shift in strategy indicated that it might be looking for a way to withdraw from the talks altogether.
Last week, Renault, which holds a 36% stake in Nissan, urged its Japanese counterpart to negotiate a higher premium for its shares, reflecting Honda’s push for control. Renault also pressed Nissan to expedite the negotiation process to ensure it could focus on its own restructuring efforts.
Renault reiterated its stance, stating, ''The most recent reports indicate that no final decision has been made by Honda or Nissan, while also suggesting that Honda’s proposal involves a full takeover of Nissan without offering a control premium to Nissan’s shareholders.'' The company added that it would ''vigorously defend the interests of the group and its stakeholders.''
Initially, Nissan had presented the deal as ''a merger of equals'' to gain support within the company for its integration with Honda. However, sources close to Renault suggested that Honda was effectively assuming control of Nissan.
Nissan’s financial challenges have significantly weakened its position in the negotiations. Its market capitalization has plummeted to just one-fifth of Honda’s, tipping the balance of power in favor of its competitor.
Following the latest developments, Nissan’s stock declined nearly 5% on Wednesday, while Honda’s shares climbed 8%.
At the initial press conference announcing the merger talks in December, Honda CEO Toshihiro Mibe emphasized the necessity of a holding company model to protect both brands, even as Honda took the lead. He reiterated that the merger would only proceed if Nissan successfully executed a turnaround strategy, which included reducing production capacity by 20% and eliminating 9,000 jobs.
Both Honda and Nissan confirmed on Wednesday that they had initially planned to finalize their management integration strategy by the end of January. However, this timeline has now been postponed to mid-February.
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