Nissan's Shares Experience a 24% Boost Following Reports of Potential Merger Discourses with Honda
Headline
Nissan's Shares Experience a 24% Boost Following Reports of Potential Merger Discourses with Honda
The value of Nissan Motor shares soared on Wednesday morning after allegations emerged about potential negotiations for a merger with Honda, allegedly aiming to help Nissan overcome its present predicament and supposedly enabling Japanese automakers to compete more effectively against electric vehicle challengers from China and Tesla.
Pivotal Details
In a Tokyo Stock Exchange disclosure, Nissan declared its examination of "diverse methods of future cooperation" with Honda and Mitsubishi within the framework of a strategic alliance announced earlier this year, "including certain topics mentioned in the media...yet, nothing has been finalized at this juncture."
Similarly, Honda and Mitsubishi Motors issued a companion announcement in a regulatory filing, emphasizing that media reports lacked any official communication from the company.
According to Nikkei Asia, which initially reported the merger discussions, Honda and Nissan are contemplating the prospect of co-existing under a single holding company, allowing them to pool their resources to confront emerging rivals.
The report suggested that the specific shares of the two manufacturers in the new holding company, as well as various financial aspects of the merger, have yet to be determined.
Upon further consideration, the merged entity intends to eventually incorporate Mitsubishi Motors—whose primary shareholder is Nissan—into the mix, as per the report.
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Market Response to the Honda-Nissan Merger Speculations
Nissan's share price jumped 24% to JPY 417.6 ($2.72) in Wednesday morning trading on the Tokyo Stock Exchange, leading to a momentary halt in trading due to hitting the single-day price limit. Mitsubishi Motor Corp shared prices surged by almost 20% to JPY 487 ($3.17) in response to the news. Initially, Honda Motors shares increased, but eventually, they dropped to JPY 1,233 ($8.04), a 4% decrease from the previous day. The shares of Japan's largest automaker, Toyota—which will remain its leading position despite the proposed merger—rose nearly 2% to JPY 2,725 ($17.76).
Eye-Opener
In the 2023-24 financial year, Toyota surpassed Honda, Nissan, and Mitsubishi combined in car sales. In the 2023-24 fiscal year, Honda, Nissan, and Mitsubishi sold 4.1 million, 3.4 million, and 815,000 vehicles respectively, while Toyota and its luxury brand Lexus sold 10.3 million vehicles; a significant difference.
Significant Figure
A drop of 94% in Nissan's net income was reported in the first half of its ongoing financial year compared to the same period last year. In addition, Nissan's operating profit declined 90% in the first half of FY 2023-24 compared to the previous year.
Background Information
In March, Nissan and Honda announced their intentions to explore a strategic partnership focusing on collaborating in the production of several key components for electric and autonomous vehicles. As part of the agreement, they started a feasibility investigation regarding the collaboration on car software platforms, EV components, and other items. In August, the strategic partnership plans were broadened to encompass Mitsubishi.
Further Reading
Honda and Nissan to Start Merger Talks Amidst EV Competition (Nikkei Asia)
Honda And Nissan Engage in Merger Talks in Quest for Enhanced EV Offerings (Our Website)
Nissan Motors and Honda are reportedly considering a merger, as stated in a Nikkei Asia report, with the aim of pooling resources to compete better against electric vehicle challengers from China and Tesla. This potential merger also includes the involvement of Mitsubishi Motors, as Nissan's primary shareholder, according to the report.
The announcement of potential negotiations between Nissan Motors and Honda caused a significant rise in the share prices of both Nissan and Mitsubishi Motors on the Tokyo Stock Exchange, while Honda Motors shares showed a temporary increase before eventually decreasing.