Merger Talks Between Honda and Nissan Scrambled
Background
Japanese auto giants Honda and Nissan confirmed on Thursday that they had scrapped merger talks announced in December, ending a tie-up that would have created the world’s third-largest automaker.
Termination of MOU
The firms said in a joint statement that they "agreed to terminate the MOU (memorandum of understanding) signed on December 23 last year for consideration of a business integration between the two companies."
Reasons for Cancellation
The firms’ intention to join forces had been seen as a bid to catch up with US titan Tesla and Chinese firms in the electric vehicle market. However, Japanese media reports have said the discussions unraveled after Honda proposed making its struggling rival a subsidiary instead of the plan to integrate under a new holding company.
Proposed Structure
The automakers confirmed in the joint statement that Honda "proposed changing the structure from establishing a joint holding company… to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange."
Reason for Cancellation
The companies decided after discussions that "to prioritise speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification, it would be most appropriate to cease discussions and terminate the MOU."
Future Collaboration
The companies will, however, continue to "collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles, striving to create new value and maximise the corporate value of both companies."
Financial Impact
The cancellation of the merger talks would have no impact on the earnings of both automakers, it said.
Honda’s Financial Performance
In a separate statement, Honda reported a net profit of 805.3 billion yen ($5.2 billion) for the nine months to December. This was a 7.4 percent decline on-year chiefly due to a decline in sales in China, even though overall sales increased 8.9 percent to 16.3 trillion yen. Honda made a slight change in its sales forecast for the full year to March, to 21.6 trillion yen from 21.0 trillion yen in the previous estimate, but kept its operating and net profit forecasts at 1.42 trillion yen and 950 billion yen, respectively.
Conclusion
The cancellation of the merger talks between Honda and Nissan marks the end of a potential significant development in the automotive industry. While the companies will continue to collaborate on strategic initiatives, the failure to merge will not have a material impact on their earnings. For Honda, the company’s financial performance remains strong, with a net profit of 805.3 billion yen for the nine months to December.
Frequently Asked Questions
Q: Why did the merger talks between Honda and Nissan fail?
A: The merger talks failed due to differences over the proposed structure of the combined company, with Honda proposing to make Nissan a subsidiary instead of integrating under a new holding company.
Q: What was the main reason for the merger talks in the first place?
A: The merger talks were seen as a bid to catch up with US titan Tesla and Chinese firms in the electric vehicle market.
Q: How will the cancellation of the merger talks affect the companies’ earnings?
A: The cancellation of the merger talks will have no impact on the earnings of both automakers.