Nissan to buy $22b stake in Mitsubishi

Tokyo: Nissan Motor Co. agreed to purchase a 34 per cent stake in Mitsubishi Motors Corp., as Japan’s second-largest automaker comes to the aid of its minicar partner rocked by a fuel-economy testing scandal.
Mitsubishi Motors will sell about 237.4 billion yen ($2.2 billion) in shares to Nissan, according to a filing on Thursday. The purchase is poised to vault Nissan past Mitsubishi group companies to become Mitsubishi Motors’ single-largest shareholder.
Nissan chief executive officer Carlos Ghosn is seizing on a more than 40 per cent plunge in Mitsubishi Motors’ market value to gain significant control of a company that Nissan relies on for minicar models crucial to its Japan sales. Buying a piece of Mitsubishi Motors also hands Nissan more exposure to Thailand and other Southeast Asian countries that boast greater growth prospects than the companies’ domestic market.
Nissan’s alliance with Mitsubishi Motors will build economies of scale and create synergies in areas including platform sharing, sport utility vehicles, pickup trucks and in markets such as Southeast Asia, Ghosn said in a joint briefing with Mitsubishi Motors Chairman Osamu Masuko in Yokohama, Japan.

Billions of dollars
“We believe we can realise billions of dollars in one time and continuing synergies by working closely together,” Ghosn said. “We are determined to preserve and nurture the Mitsubishi brand, and we will help this company to address the challenges it faces, particularly in restoring consumer trust in its fuel-economy performance.”
Both Ghosn and Masuko said the companies have held talks over the years on options to deepen the partnership, with the recent turn of events accelerating the process. The companies plan to sign an agreement by May 25 in which Nissan can name four directors to Mitsubishi Motors’ board, including the chairman. The deal will be invalid if not completed within a year.
The transaction eases concerns about the viability of a Japanese automaker, which has dealings with 7,777 companies affecting 410,000 people, according to Teikoku Databank Ltd. estimates.
Nissan fell 1.4 per cent to close at 988.1 yen in Tokyo trading. Mitsubishi Motors rose 16 per cent, the biggest gain in almost three years. The stock did not trade throughout the day as buyers outnumbered sellers by as much as 34 to 1. The Tokyo Stock Exchange loosened its matching requirement at the closing auction, allowing 2.6 million shares to exchange hands at 575 yen per share.
Nissan’s dependence on Mitsubishi Motors showed in April. After suspending deliveries of the Dayz and Dayz Roox models involved in the fuel economy scandal for the last two weeks of April, Nissan’s monthly sales declined 51 per cent for minicars and 22 per cent overall, including standard vehicles.
Nissan on Thursday forecast its profit for the current fiscal year will be little changed, as a stronger yen eroded overseas earnings and domestic sales of minicars supplied by Mitsubishi Motors slumped.
Net income may rise to 525 billion yen ($4.8 billion) in the year ending March from 523.8 billion yen in the preceding period, Nissan said. That compares with the 548.6 billion-yen average of 22 analyst estimates compiled by Bloomberg.
After overstating the fuel economy of its minicars by as much as 10 per cent, Mitsubishi Motors faces the prospect of compensating owners of those vehicles for their shortcomings in performance. It also may have to pay back Japan’s government for tax rebates that its minicars shouldn’t have been eligible for.