Nissan Warns FCA-Renault Merger Would Call for Review of Existing Alliance

Andrew Cummings
June 6, 2019

Renault is now Nissan's top shareholder with a 43.4 percent shareholding.

If the FCA-Renault merger is approved by Renault shareholders as proposed by FCA, the new entity would own 43.3 percent of Nissan's shares and voting rights, as Renault now does, while the Japanese automaker's stake in the merged companies would be diluted to just 7.5 percent.

But after late-night talks with John Elkann, the Italian-American carmaker's chairman, officials approved a compromise giving the French government one of four board seats allocated to Renault, balanced by four FCA appointees, Reuters sources said.

A Renault-Fiat Chrysler merger could reshape the global auto industry as it invests heavily in electric and autonomous cars.

Shares of Fiat rose 3.9% in Milan on Tuesday, while Renault jumped 4.3% in Paris, giving the firms a combined market capitalization of about 35 billion euros ($39.3 billion).

Since that's not the case, and "the proposal now being discussed is a full merger", Nissan warns that it might have to fundamentally review the "existing relationship between Nissan and Renault" given the severe corporate transformation the French will go through at the hands of such a deal.

Directors of Renault yesterday postponed a decision on whether to open merger talks with Fiat Chrysler amid disquiet over the €33 billion deal in France.

Renault's board is meeting Tuesday near Paris to discuss the Fiat Chrysler merger proposal and appears ready to approve it.

France has broadly welcomed the deal, on the condition it guarantees Renault's domestic blue-collar jobs and plants, while also preserving Renault's existing alliance with Japanese partner Nissan.

As per FCA's request, together with Renault it would form a new business to be run by a new Dutch parent company. He also knows that working with FCA could "expand the playing field for collaboration and create new opportunities for further synergies". "This would require a fundamental review of the existing relationship between Nissan and Renault", Saikawa said, adding that Nissan would analyze and consider its "existing contractual relationships".

The French government, Renault's most powerful shareholder, wants additional guarantees from Fiat to avoid job cuts in France and other steps to protect national interests.

Some investors have raised concerns about the deal.

According to Saikawa, Renault is to discuss the terms of the proposed deal this week.

"The state will play its role fully as a Renault shareholder".

The former chief executive of both Nissan and Renault, Carlos Ghosn, is awaiting trial following his fourth arrest amid allegations of financial misconduct. Remember, Nissan previously felt the alliance with Renault was unfair in many ways, such as a lack of influence.

Other reports by iNewsToday