Renault to offer Nissan a merger plan

A source has outlined Renault's proposed merger plans to The Nikkei.

In the proposal, a new holding company will be formed to own 100% of Renault and Nissan, with current shareholders swapping their current shares for stakes in the new company.

For the purposes of the stock conversion, both Renault and Nissan will be valued equally. This will see the French government's 15% stake in Renault changed into a 7.5% share of the combined company.

Nissan will retain its 34% controlling interest in Mitsubishi Motors, the third member of the current Renault Nissan Mitsubishi Alliance.

The combined Renault Nissan would then be based in a third country. Singapore has been mooted as a possible location for its new headquarters as it would be close to Nissan's homeland, and free from France's Florange rule, which grants long term investors such as the French government double voting rights.

Both Renault and Nissan would have equal representation on the new company's board, and the merged automaker would be listed on both the French and Japanese stock exchanges.

If reports are correct, this latest offer looks unlikely to tempt to Nissan into marriage. The Japanese automaker generates more of the alliance's profits, and its market value of $47 billion is much greater than Renault's $28 billion.

Due to Renault's rescue of Nissan in late 1990s, however, the French automaker has a 44 per cent stake in Nissan with voting rights and seats on the board. Nissan in turn owns 15 per cent of Renault, but without any voting rights.

According to The Nikkei, Jean-Dominique Senard, Renault's chairman, officially floated the idea of a merger at the April 12 meeting of the Renault Nissan Mitsubishi Alliance's board.

The proposal was rejected by Nissan CEO Hiroto Saikawa.