Renault SA open to reducing stake in Nissan Motor in carve-out talks

Renault SA is open to reducing its stake in Nissan Motor Co. as the partners bargain over the French automaker’s plan to split its electric-car and combustion-engine vehicle assets, according to people familiar with the discussions. 
 

Executives have discussed Renault’s carve-out plan and reshaping the pair’s two decade-old alliance since February during meetings in France and Japan. Negotiations are intensifying, with the French carmaker planning to announce details in early November. Renault Chief Executive Officer Luca de Meo is due to attend the Formula 1 race in Suzuka, central Japan, on Sunday, giving him an opportunity to speak with Nissan CEO Makoto Uchida. 

The parties’ lopsided capital ties have long been a contentious issue for Nissan. The Japanese company is pressing Renault to reduce its stake to 15% from 43% to draw level with Nissan’s share in Renault, the people said, declining to be named as details are private. Nissan may consider raising funds to buy back shares from the partner that rescued it in the late 1990s, Reuters reported separately, citing a person it didn’t identify. 

While the weekend talks are unlikely to yield concrete results, any movement will hinge on concessions from Nissan and probably include agreed upon price levels or specific project milestones that will trigger share sales, the people who spoke to Bloomberg News said. The French state, which has a 15% shareholding in Renault, also needs to approve any plan, they said. 

Transformational Revamp
 

The potentially transformational revamp, which could take effect as soon as next year, comes as Renault seeks to sure up its future in the shifting European car market, the company’s mainstay. Under the plans, an entity dedicated to EVs and software would be based in France and employ about 10,000 people by 2023, while a second entity would focus on internal combustion and hybrid powertrains, and be based outside France, also with a staff of about 10,000. 

Representatives for Renault and Nissan declined to comment when contacted by Bloomberg. The Wall Street Journal and the Financial Times reported earlier on some of the details of the talks. 

De Meo, who will present an update of his strategy for Renault Nov. 8, is due to give details on the planned carve-outs -- whose codenames are “Horse” and “Ampere.” While no decisions have yet been made, there’s a chance the talks will lead to an agreement before this date, the people said. Given the carmakers’ close ties, Nissan has to sign off on the carve-out plans, the people said.

Renault is seeking Nissan’s participation in its EV business while retaining a 51% stake, the people said. For the combustion-engine assets, the company is planning a new entity with Aurobay, a joint venture between Volvo Car AB and China’s Zhejiang Geely Holding Group as well as other investors. 

Talks are focused on Renault retaining a minority stake in the legacy business and possibly aiming for an initial public offering, the people said. Nissan is resisting this move due to concerns about giving a Chinese company access to the technology, they said.

Renault shares closed up 4.9% Friday, erasing year-to-date losses.

“What could come out of this is an agreement for a planned selldown of the stake and I think that would be very well taken by the market,” said Jefferies analyst Philippe Houchois. “It doesn’t need to be done today, it could be over a number of years,” with Renault agreeing to sell the Nissan stake “in tranches, at certain prices,” and the Japanese company getting priority on those sales, he said.

“Anything like this that unlocks a situation that’s become frozen is positive,” Houchois said.