‘Falling apart’: Nissan set to walk away from $93 billion Honda merger

A huge $93 billion merger of two of Australia’s – and the world’s – biggest car brands is said to be in imminent danger of falling apart.

Nissan is set to walk away from a $93 billion merger after potential marriage partner Honda became “aggressive” about the deal.

The Japanese car maker’s shares plunged by nearly 5 per cent on Wednesday but Honda’s rose by 8 per cent.

Japan’s Nikkei business daily and other local media earlier said Honda had proposed making Nissan its subsidiary, instead of the previous plan to integrate under a new holding company. Nissan had trumpeted the deal as a “merger of equals,” rather than it being taken over.

The change has led the merger talks to be reportedly close to collapse with Nissan set to scuttle the proposed deal. But without Honda, the future for Nissan looks increasingly bleak.

Honda’s main models in Australia include the HR-V, CR-V, Accord and Civic. Nissan sells the Qashqai, X-Trail, Navarra and Leaf vehicles in Australia.

“Strong opposition” within Nissan to the $US58bn merger was behind its decision to withdraw from the talks, the Nikkei said. Private broadcaster TBS published a similar report.

The Financial Times said that Nissan thought Honda had become suddenly “aggressive” which was potentially because it was looking for a way to back out of the deal.

Discussions on setting up a holding company were launched in December but faltered as the two companies disagreed on the integration ratio and other conditions, the newspaper added.

Nissan said in a statement it had not announced anything officially, but the two companies “are in the stage of advancing various discussions, including the contents of the report”.

“We plan to establish a direction and make an announcement around mid-February.”

‘Falling apart’

Russ Mould, and investment director at online investors AJ Bell said Honda’s moves meant the deal was now “falling apart”.

“Honda executing a three-point turn to propose Nissan becomes a fully owned subsidiary rather than bringing both names together under a jointly owned holding company means already fractious talks on the tie-up may have run out of road.

“Nissan’s negotiating position hasn’t been helped by its weak financial performance which has seen its market value plummet.”

Makoto Uchida (L), president and CEO of Japanese automaker Nissan, and Toshihiro Mibe (R), director, president and representative executive officer of automaker Honda, shaking hands at the start of in a press conference in Tokyo. (Photo by Richard A. Brooks / AFP)

The company’s shares plunged 4.8 per cent before the Tokyo Stock Exchange suspended their trading, saying the media reports on the merger’s cancellation needed to be verified.

Honda, however, closed 8.2 per cent higher, having soared nearly 12 per cent at one point.

Nissan and Honda agreed in December to start talks on joining forces to create the world’s third-largest automaker – seen as a bid to catch up with Tesla and Chinese electric vehicle firms.

Honda’s CEO insisted at the time it was not a bailout for Nissan, which last year announced thousands of job cuts after reporting a 93 per cent plunge in first-half net profit.

Business has been tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.

China overtook Japan as the biggest vehicle exporter last year, helped by government support for EVs.

Honda HR-V. Photo Source: Supplied

Honda and Nissan are Japan’s number two and three automakers after Toyota. They already agreed last year to explore a partnership on EV software and components among other technologies, an initiative joined by Mitsubishi Motors in August.

But the smaller automaker’s chief said this week it would make a final decision on whether to join the Honda-Nissan merger talks in mid-February or later.

In December, reports said Taiwanese electronics behemoth Foxconn had unsuccessfully approached Nissan to acquire a majority share.

It then reportedly asked French car maker Renault to sell its 35 per cent stake in Nissan – a pursuit that was put on hold before the merger talks were announced.

A Renault spokesman told AFP that “the information relayed by the press does not indicate that a decision has been made”.

“But they suggest that the planned operation is a takeover of Nissan by Honda. And this does not include a control premium (financial incentive) for Nissan shareholders,” the spokesman said, adding that Renault “will continue to defend the interests of the group and its shareholders”.

Nissan has weathered a turbulent decade, including the 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan concealed in a music equipment box.

Originally published as ‘Falling apart’: Nissan set to walk away from $93 billion Honda merger