Renault to sell 5% stake in Nissan under share buyback program

French carmaker, Renault on Tuesday announced to sell a tranche of around 5 percent of its stake in Japan's Nissan. The stake sale has come as a part of a rebalancing plan of the two companies' long-standing alliance, Renault said in a statement on Tuesday. 

The stake sale is expected to be worth around $824 million (€765 million), but will result in a capital loss of €1.5 billion, the French company said.

The sale will be implemented under the company's share buyback program announced by Nissan. The buyback program will be executed on Wednesday, the company added in its statement. Renault and Nissan finalised at the end of July the terms of a restructuring of their alliance after months of negotiations, aiming for a downsized, but more pragmatic and agile partnership. Renault Group and Nissan will continue to hold cross-shareholdings of 15%.

Nissan and Renault tie-up 

The partnership between Nissan and Renault was jolted in 2018 by the arrest of Carlos Ghosn, chairman of both companies. Since then, they have drifted apart and are now charting separate paths.

According to analysts, the announced stake sale will help Nissan in improving its situation in the stock market. The Japanese carmaker's shares are trading below the Tokyo Stock Exchange's guideline of maintaining a price-to-book ratio above 1.  Given the guideline, the buyback will “help improve the situation,” said Bloomberg Intelligence analyst Tatsuo Yoshida.

Moreover, the cash will also boost, Chief Executive Officer Luca de Meo's efforts to get Ampere, Renault's electric-vehicle and software arm. The company is planning to split off the unit and list it as a separate public entity as soon as April or May. Nissan has also agreed to invest in Ampere.

Renault transferred its 28.4% stake in Nissan into a trust in early November to pave the way for a reduction of its holding. Company CEO De Meo said last month that Renault would begin offloading the stake “very soon” in early 2024. 

For Nissan, the buyback came under the value of cash and equivalents, which stood at $11 billion at the end of September, reported BB.

“It’s good news for the stock that Nissan will retire the equivalent of 5% of its outstanding shares,” Yoshida added.