(Bloomberg) — Honda Motor Co. outlined plans for a long-term deal that would amount to a takeover of Nissan Motor Co., as Japanese automakers struggle to keep up in an increasingly competitive global auto industry.
Most read from Bloomberg
The two announced on Monday a preliminary agreement to establish a joint holding company that aims to take the shares public in August 2026. While their executives called the transaction a merger, Honda will take the lead in forming the new entity and appoint a majority of its directors. . Nissan’s partner Mitsubishi Motors Corp. could also participate in the deal.
“At first glance it is an acquisition,” says Neal Ganguli, partner and managing director at the automotive and industrial practice of consultancy AlixPartners. “Scale certainly has advantages, and people will have to take that into account.”
Honda and Nissan are both struggling to compete with rising domestic automakers in China, which overtook Japan last year as the world’s largest auto-exporting country and is set to advance even further in 2024. Honda CEO Toshihiro Mibe spoke about the difficulty ahead for the companies when he said at a press conference that their goal is to be competitive by 2030.
“Merger synergies between Honda and Nissan will take some time to materialize if a deal is struck in 2025,” Tatsuo Yoshida, a senior industry analyst for Bloomberg Intelligence, said in a note. “Nissan may get relief from financial pressure, while Honda’s near-term benefits may be limited.”
Honda did offer a sweet treat to its shareholders, announcing plans to buy back as much as ¥1.1 trillion yen ($7 billion) of its shares by this time next year. The upper limit for the buyback is 24% of the outstanding shares.
A Honda bailout could avert total disaster for Nissan and Mitsubishi Motors, whose standings have deteriorated since the arrest of their former chairman Carlos Ghosn in November 2018. Just over a year after Nissan accused its longtime leader of financial misconduct, he fled from Japan to Lebanon. .
Ghosn, 70, has denied all allegations and claimed Nissan had defamed him.
Mitsubishi Motors, which is 24.5% owned by Nissan, has signed a preliminary agreement to explore joining the deal with Honda and said it expects to confirm the decision by the end of January.
Honda’s shares closed 3.8% higher in Tokyo on Monday, recouping much of the loss since deal talks were first reported last week. Shares of Nissan and Mitsubishi Motors rose 1.6% and 5.3% respectively.