20 November 2018

Time for Nissan to bid for Renault ?

[dropcap]G[/dropcap]overnance matters, more than ever and it has long been an issue at Renault. When a company, or in this instance a group of companies, is dominated by one individual, jealousy can pop up easily. What has happened in Japan today seems to be the result of information being leaked by one or more whistleblowers. We take the view that Nissan to bid for Renault is an option, net investment required is less than €1bn. Carlo Ghosn, the CEO and Chairman of Renault and the, until last week, uncontested ruler of Nissan, Mitsubishi, Avtovaz and the Renault-Nissan Alliance, has been arrested in Japan. He is accused of having mis-stated the income he received from Nissan by about €40m over the last years. In addition, he is accused of having embezzled company money. As a consequence, Nissan’s CEO Hiroto Saikawa will ask the company’s Supervisory Board to dismiss Carlos Ghosn with immediate effect. What impacts for the Alliance structure? In our opinion, this might change the entire structure of the Alliance of this group of companies. The frictions between the French and Japanese side started about a year ago in public. At that time, Nissan started to request voting rights on the shares it holds in Renault (15%), whereas Renault controls almost 45% of Nissan. Renault-Nissan b.v. (RNBV), a Dutch company which includes some of the other joint-venture partners and activities such as those with Daimler-Benz, plays an important role. RNBV is also run by Carlos Ghosn and, although he tries to assure investors that Renault’s management and board has to agree on all important decisions taken by RNBV, this company is not directly controlled by any Supervisory Board. In fact, at Renault’s last AGM held on 15 June 2018, RNBV was just one important topic. Management again stressed that this holding company has no direct influence on business decisions made by the two partners but has the task to find revenue-increasing and cost-reduction instruments for the two partners and identify new opportunities to increase synergies among all partners (i.e. including Mitsubishi, Avtovaz, and Daimler-Benz). Less than €1bn to bid for Renault If all of the above translates into the dismissal of Carlos Ghosn from all his positions within this group of companies, the entire picture might change. In fact, we cannot exclude Nissan initiating a reverse takeover as the acquisition of Renault (excluding its stake in Nissan) currently costs less than €5bn and after today’s (19 November) collapse of both Renault’s and Nissan’s share prices, the price is down to around €4bn. In fact, when we then also deduct the value of Nissan’s share in Renault which it already owns (c. €2.5bn) and the value of Renault’s stake in Daimler (c. €0.8bn), the net cash investment is less than €1bn for Europe’s third largest car producer. Renault governance analysis