A sign marks the location of a Honda dealership in Libertyville, Illinois, on December 18, 2024.
Scott Olson | Getty Images
Shares of the Japanese automaker Honda were on their way to their best day in 16 years announced plans to buy back up to 1.1 trillion yen ($7 billion). of its shares on Monday as part of merger talks Nissan.
Nissan and Honda said they had started Official merger negotiationswhich could catapult them into the third largest car manufacturer in the world by sales.
Honda also said it would buy back 24% of issued shares by December 23 next year. Its shares were recently up 15.51% and would have their best day since October 2008 if the gains continue. Nissan shares fell over 1%.
The Honda-Nissan deal would focus on sharing knowledge and resources, achieving economies of scale and creating synergies. said Honda CEO Toshihiro Mibe. A holding company will be established as the parent company for Honda and Nissan and will be listed on the Tokyo Stock Exchange.
“These two companies operate in the same market and have a very similar brand image and very similar products,” Hakan Dogu, chairman of Alagan Mobility Solutions, told CNBC on Tuesday.
“The new management faces a major challenge to differentiate the product range and expand the business,” he added.
Honda shares since the beginning of the year
The talks are scheduled to conclude in June 2025.
Nissan’s strategic partner Mitsubishi has been given the opportunity to join the new group and is expected to make a decision by the end of January 2025.
Honda reported 1.382 trillion yen operating profit for the full year ending March 2024, versus 568.7 billion yen for Nissan. The automakers would have a combined value of nearly $54 billion, with Honda’s market cap contributing the larger share of $43 billion.
analysts suggested that the possible merger is due to Nissan’s financial difficulties and the restructuring of its long-standing partnership with France’s Renault.
In its latest quarterly report Nissan announced plans to cut 9,000 jobs and reduce its global production capacity by 20%.
—CNBC’s Jenni Reid contributed to this report.
