Nissan-Mitsubishi Merger Ruled Out

Nissan Motor Co has announced buying 34 per cent controlling stakes in Mitsubishi Motors Corp as both parties struck a $2.2 billion deal. The agreement couldn’t have come at a better time for the troubled-hit manufacturer as $3 billion of its market value were wiped following the recent fuel economy data manipulation scandal.

Mitsubishi models are popular in Southeast Asian countries like Philippines, Indonesia and Thailand where Nissan struggled to find a foot in. Therefore, the acquiring of Mitsubishi will only do them all the goods for the second largest Japanese car maker. For the last five years, Nissan and Mitsubishi are working closer on development and manufacturing JV but it doesn’t involve any cross stake holding.

The deal penned yesterday means that Mitsubishi Motors will provide new shares to Nissan Motor Co at a 5.3 per cent discount – at $2.18 billion or 237.4 billion yen. The 34 per cent stakes in Mitsubishi has put Nissan in a firm driving seat as under Japanese shareholdings, it’s enough to wield control. Mitsubishi Corp, Mitsubishi Heavy Industries Ltd and Bank of Tokyo Mitsubishi UFJ along with subsidiaries had held around 34 per cent stake before the deal which will be diluted to around 22 per cent.

Nissan CEO Carlos Ghosn said at the presentation in Yokohama, the agreement will allow for a synergic relation between both brands as they will jointly develop technologies, coordinate in purchasing, utilise manufacturing and assembly facilities, share platforms, etc in the developing markets and the established arenas in which each has strength of their own.

Carlos Ghosn has vowed to restore the lost trust in the brand due to the unfolded fuel economy scandal as Mitsubishi confessed last month that it overstated fuel economy of at least four of its existing models. As investors demanded compensation costs, the company hit a new low and lost over 40 per cent shares in the market. Along with payment to Nissan, Mitsubishi is estimated to be facing $1 billion as compensation fee to customers.

The revived Mitsubishi will be led by a Nissan executive and thus raft of changes in the working personnel from top of the board to the bottom are expected as the agreement is more likely to be signed on May 25. The improvement Kei car market (small car segment) in Japan played a key role in the signing of the deal as Nissan looks to take advantage of Mitsubishi’s expertise to overhaul Suzuki and Daihatsu. Moreover, Renault, Nissan and Mitsubishi have managed a combined sales of about 9.3 million vehicles as they target industry toppers Toyota and Volkswagen AG.

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