Nissan Motor Co has become the latest buyout target in Japan as it explores a merger with Honda Motor Co and faces an overture from Hon Hai Precision Industry Co (鴻海精密), known as Foxconn Technology Group (富士康科技集團) internationally.
Shares in Nissan yesterday jumped 24 percent, the most on record, to hit the daily limit, after the two Japanese automakers acknowledged that talks are ongoing to better position themselves for competitive challenges during a time of upheaval in the global auto industry.
Foxconn — a Taipei-based manufacturer of iPhones, which has been investing heavily in factories to build electric vehicles — has also approached Nissan to take a controlling stake, a person with knowledge of the matter said.
Photo: AP
It was unclear if Nissan had entered talks with Foxconn or already rebuffed its overture and the position of Renault SA — Nissan’s largest shareholder with a 36 percent stake — is also uncertain.
Yet the flurry of activity around Nissan reflects a charged corporate environment in which Japan’s biggest companies are vulnerable to takeover like never before.
Honda is considering several options that might also involve a capital tie-up or the establishment of a holding company, Honda executive vice president Shinji Aoyama said yesterday.
One option being considered is the creation of a new holding company under which the combined businesses would operate, a person familiar with the talks said.
The transaction could also be expanded to include Mitsubishi Motors Corp, which already has capital ties with Nissan, the person said.
An announcement by Honda and Nissan could happen as soon as on Monday, TBS reported.
They plan to sign a memorandum of understanding to discuss shared equity stakes in a new holding company, the Nikkei reported earlier.
Shares in Honda fell as much as 3.4 percent.
A spokesperson for Nissan declined to comment.
A representative for Foxconn was not immediately available for comment.
The Nikkei reported that Foxconn’s interest in Nissan accelerated the Honda-merger effort out of fears that the Japanese company might be vulnerable to a takeover by the Taiwanese firm.
A merger between Honda and Nissan would effectively consolidate the Japanese auto industry into two main camps: One controlled by Honda, Nissan and Mitsubishi and another consisting of the Toyota Motor Corp group of companies.
Nissan and Honda are facing challenges around the world, including in China, where both automakers are suffering. The shift toward electrification, which is happening at varying speeds in different markets, is also disrupting manufacturing and business models that have been in place for decades.
Honda, Nissan and Mitsubishi combined sold about 4 million vehicles globally in the first six months of this year, well shy of the 5.2 million that Toyota sold on its own.
Combining forces would allow the two companies to fend off Toyota, the world’s largest automaker, at home and abroad.
Toyota has taken stakes in Subaru Corp, Suzuki Motor Corp and Mazda Motor Corp, creating a powerhouse of brands backed by its top-notch credit rating.
For Foxconn, taking a controlling stake in a Japanese firm would not be unprecedented. In 2016, it took a two-thirds stake in electronics maker Sharp Corp, handing it benefits including a well-known consumer electronics brand, LCD display production capacities and intellectual property.
It has been reducing that interest slowly, but is still the top shareholder.
For Nissan, one thing is for certain: It needs help to put it back on a stronger financial footing.
Revenue growth has stalled, profit is dwindling and activist investors are adding pressure on its management. A daunting debt load has also led to speculation in the credit markets about its investment grade rating.
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