Renault looking for Nissan merger, FCA acquisition

27 March 2019

French carmaker Renault plans to restart merger talks with its Alliance partner Nissan before moving on to acquire another manufacturer, according to reports.

The UK’s Financial Times (FT) states that Fiat Chrysler Automobiles (FCA) is among the preferred targets, putting Renault in competition with its domestic rival PSA Group. The planning marks a new strategy following the arrest of former CEO Carlos Ghosn for financial misconduct.

Both Renault and Nissan have said since his arrest that their focus was to make their alliance work following the fallout over Nissan’s reporting of Ghosn to authorities. However, the recent creation of a new board to ensure the smooth running of the group has improved confidence that merger plans can advance; the paper quotes people familiar with the matter.

Such talks could commence within 12 months. Following this, the combined business would be better placed to target a further acquisition that would prepare it for a fight for global dominance with companies such as Volkswagen and Toyota.

The FT also reports that two people familiar with the matter said that Mr Ghosn held talks about merging Renault with FCA two to three years ago but dropped the proposal after opposition from the French Government. These talks have not previously been reported.

Until 2017, Renault Group was Europe’s second largest vehicle manufacturer. However, PSA’s purchase of Opel/Vauxhall leapfrogged Renault thanks to the new combined sales figures. Based on 2018 vehicle registrations in Europe, a combined Renault, Nissan and FCA would have sold just under 3.2 million units, putting it in clear second around 400,000 units behind market leader Volkswagen Group.

FCA thoughts

Fiat Chrysler itself is seeking a partnership or merger, with Chairman John Elkaan meeting several rival companies to sound out potential deals to strengthen the carmaker.

PSA Group was recently reported to be interested in the Italian group and the Peugeot family has backed CEO Carlos Tavares to make another purchase following the successful addition of Opel. However, it is unclear whether talks are ongoing between the two, with conflicting reports suggesting contact has broken down, or that FCA is keen on a deal.

FCA executives apparently do not like the idea because it would increase exposure to Europe’s mature market while the Agnelli family, with a controlling stake, is not interested in a transaction financed with PSA stock, a position the company is offering.

When speaking about PSA’s advances at the Geneva International Motor Show in March, new FCA CEO Mike Manley said the company ′would look at any deal that would make Fiat stronger.’

Renault could, therefore, miss out on the opportunity to acquire FCA should talks with PSA Group progress. However, the French firm needs to ensure its own Alliance stability first and look at mergers closer to home.

Even though it is a midscale carmaker making 5 million vehicles a year, FCA, which owns the Jeep and Alfa Romeo brands, would still be a costly target. The company has a market capitalisation of more than €20 billion, according to the paper. Renault, Nissan and the third member of the alliance, Mitsubishi, have a combined market value of more than €50 billion.