FCA-Renault merger could still happen

11 June 2019

Fiat Chrysler Automobiles (FCA) and Renault are looking for ways to revive their planned merger, and hope to secure approval of the French carmaker’s alliance partner Nissan.

The Japanese manufacturer is likely to urge Renault to reduce its 43.4% stake in its business in return for its support of the proposed merger, although it is still far from clear whether the plan could be revived at all.

FCA chairman John Elkann withdrew the ′friendly proposal’ earlier this month following a decision by the French Government, which holds a 15% stake in Renault, to block a board-level vote and demand more time to win over Nissan. The Japanese company had said it would abstain from the initial vote on the plans.

Both parties blamed the failure of the proposal on the French Government following this intervention.

′It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,’ FCA said in a statement.

Nissan tension

The move also highlighted the frailties of the Renault-Nissan partnership, following the arrest of former Renault CEO and Nissan chairman Carlos Ghosn over financial irregularities last year.

Since the breakdown, Elkann and his French counterpart Jean-Dominique Senard have had talks about reviving the plan. The Renault chairman and CEO Thierry Bolloré are upbeat about that prospect, three alliance sources said. It is also believed that top FCA executives have travelled to Nissan’s headquarters in Japan to discuss the matter.

Renault and FCA declined to comment.

Nissan CEO Hiroto Saikawa would press for a substantial reduction to Renault’s stake as part of any agreement, according to sources. Nissan’s 15% stake in Renault carries no voting rights and the Japanese have often argued that shareholdings between the two carmakers need ′rebalancing’.

For Nissan, the potential merger would ′swap out one small 43% shareholder for a bigger 43% shareholder it doesn’t know,’ said an unnamed source.

French open

France may not automatically oppose a reduction to the Nissan holding if it secured Renault’s place at the heart of a consolidated group. The Government has also said it could reduce its own 15% Renault holding, to the same end.

′All options can be considered,’ Finance Minister Bruno Le Maire told Le Figaro after the deal collapsed when asked about Japanese pressure for Renault to reduce its Nissan stake.

The FCA-Renault deal would have seen both companies acquired by a listed Dutch holding company owned 50-50 by current FCA and Renault shareholders, after payment of a €2.5 billion special dividend to FCA shareholders.

Paris had secured stronger job guarantees and terms, including a cash payment to Renault shareholders, following public criticism that the bid undervalued Renault.