Honda Likely to Own Majority of Holding Firm with Nissan

Jiji Press

11:24 JST, December 31, 2024

Tokyo (Jiji Press)—Honda Motor Co. and Nissan Motor Co. are expected to discuss a plan for Honda to own a majority stake in a holding company the two Japanese automakers plan set up in summer 2026 for their business integration, it has been learned.

The ownership ratio for the joint holding firm is highly likely to be decided on the basis of factors including market capitalization of Honda and Nissan. Currently, Honda’s market capitalization is far larger than Nissan’s.

Nissan’s faltering business performance could be a hurdle to the planned integration, and there may be twists and turns depending on the course of the two firms’ integration talks, industry watchers said.

The two companies announced on Dec. 23 the start of negotiations on unifying their operations. Mitsubishi Motors Corp., another Japanese automaker, for which Nissan is the top shareholder, may also join the business integration talks. The integration, if realized, would create the third-largest automobile group in the world in terms of vehicle sales by volume, after Japan’s Toyota Motor Corp. group and Germany’s Volkswagen group.

Honda’s stock ended at ¥1,535 on the Tokyo Stock Exchange’s top-tier Prime section on Monday, the final trading day of 2024, compared with ¥480 for Nissan. Based on the closing prices, Honda’s market capitalization came to ¥8,104.8 billion , more than four times Nissan’s ¥1,782.7 billion .

Mitsubishi Motors’ market capitalization is way lower, at ¥777.8 billion . The company has until the end of January 2025 to decide whether to join the Honda-Nissan integration talks.

Honda has the right to appoint more than half of the planned holding company’s board members, including its president.

Honda and Nissan, slated to conclude a definitive agreement by June 2025 on the business integration, are expected to decide their ownership ratio for the holding firm based on their stock prices and earnings.

If the three-way integration including Mitsubishi Motors materializes, Honda is highly likely to have a stronger voice than Nissan and Mitsubishi Motors in drawing up management policies and making other key decisions, analysts said.

Facing a severe earnings slump amid sluggish vehicle sales in North America and China, Nissan plans to trim 20 pct of its global production capacity and shed 9,000 jobs, or 7 pct of its workforce around the world. But the company has yet to announce specific measures for the streamlining.

A challenge is whether Honda can obtain understanding for the integration from its shareholders.

Hideyuki Sawada, head of the research division at merger and acquisition adviser Recof Corp., cited an example of Japanese chemical makers Nippon Shokubai Co. and Sanyo Chemical Industries Ltd., which basically agreed in 2019 to integrate their operations but later canceled the deal due to Nippon Shokubai’s deteriorating earnings.

The possibility of the Honda-Nissan negotiations falling apart is not zero, Sawada suggested.