Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Honda is willing to resume takeover talks to create the world’s fourth-biggest car producer if Nissan’s chief executive Makoto Uchida steps down, according to people with knowledge of the deliberations.
The 58-year-old had been one of the strongest advocates within Nissan for a deal with Honda. However, relations between Uchida and his counterpart Toshihiro Mibe deteriorated as Honda became frustrated with the speed of Nissan’s restructuring and the depth of its financial troubles.
The merger talks broke down after Honda demanded that Nissan become a fully owned subsidiary instead of establishing a holding company, with the two companies on an “equal footing”. Honda would be prepared to revive negotiations under a new boss who can better manage internal opposition, according to one person.
Uchida has indicated his desire to stay till 2026, but faces pressure to depart over the next few months from board members and partner Renault after botching negotiations for a $58bn megadeal. Nissan’s board of directors had also begun informal discussions over the timing of his exit, said a person familiar with those talks.
Honda remains attracted to Nissan’s capital ties with smaller rival Mitsubishi Motors for its plug-in hybrid technology and strong footprint in south-east Asia.
“I do regret it ended out this way,” Mibe told reporters when the merger talks broke down. However, according to people familiar with Mibe’s thinking, one stipulation for a renewed bid is that Uchida steps down.
“If discussions about business integrations arise again, we will not completely rule out the possibility of resuming the discussions,” Honda said.
The abrupt collapse of the Honda deal has left Nissan, which is wrestling with slumping sales and looming debt repayments, scrambling to find an alternative partner to secure its survival.
Foxconn has been circling for months, confirming last week its interest in acquiring Nissan shares as a means to secure contracts to manufacture electric cars. Jun Seki, a former colleague who previously ran against Uchida to become Nissan’s chief executive, is now chief strategy officer for Foxconn’s EV division, and spearheaded the overture to Renault, to buy its Nissan shares.
Yet as Nissan becomes increasingly vulnerable and the Japanese establishment seeks to ward off Foxconn, which is seen as too close to China, more radical proposals are also being floated.
Global private equity groups — including KKR, which owns Marelli, a key Nissan supplier — and US tech companies have been asked to consider investing in the company, according to three people with knowledge of the discussions.
Some advisers were trying to put together consortiums to share costs and the risks involved in buying a company that needed deep restructuring, added the people. One proposal examines the involvement of US automakers, which want to secure more domestic factories to navigate the tariff regime of President Donald Trump.
“Any buyer can have two approaches: you get in right away or wait until they get into trouble and the price tag falls. Potential buyers don’t need to rush into buying the company. Nissan is the one in a hurry,” said Macquarie analyst James Hong.
Nissan’s partner Renault is also considering its options as it reactivates talks with Foxconn, who approached the group late last year about buying some of its shares in Nissan.
The French carmaker is committed to its alliance with Nissan but wants to sell a large chunk of the 36 per cent it still owns in the Japanese group at a premium. Renault declined to comment.
Nissan faces a looming cash flow crunch if sales continue to fall. The company has ¥1.2tn ($6.6bn) of net cash but burnt ¥506bn in the first nine months of the financial year.
Insiders say that Nissan needs to ensure it has a sufficient cash buffer, not only to fund restructuring costs, but also to avoid a “vicious cycle” from interest rates on its loans rising because of a potential credit downgrade. Its bonds are rated junk status by S&P and are clinging on to investment grade status from other rating agencies.
Mizuho Financial Group, Nissan’s main bank and one of the key actors that pushed for a merger with Honda, is trying to find ways to inject liquidity into the group.
Motoo Nagai, a former Mizuho executive, and Yasushi Kimura, the board’s chair, were the only members who had expressed support for Honda’s subsidiary proposal.
The bank is now exploring funding solutions that involve private equity groups, according to people familiar with the matter. Mizuho declined to comment.
Uchida said on Thursday he wanted to step aside once Nissan was back on the recovery path but would go sooner if asked.
“My responsibility is truly significant . . .[but] stepping down without any improvement is irresponsible,” he said. “It’s not my intention to hang on to this position.”
Read the full article here
