Renault to keep Nissan dividend in alliance overhaul

PARIS -- Renault Group will continue to benefit financially from its current 43.4 percent stake in Nissan, even though much of that will be held in a trust under a pending agreement to reshape the two companies’ alliance.

The automakers will hold a 15 percent stake in each other under a draft agreement announced on Monday, while Renault would place 28.4 percent of Nissan into a trust, which could sell down the shares when market conditions are favorable.

The plan is subject to approval by directors at Nissan and Renault, with full details expected to be released on Feb. 6.

Since the alliance began in 1999, Renault has received annual dividends from its share in Nissan, sometimes billions of dollars’ worth each year, although Nissan losses also hurt Renault Group’s bottom line. 

In 2018, for example, Renault received 1.5 billion euros ($1.6 billion) from Nissan, which amounted to 46 percent of its net profits. In the third quarter of 2022, Nissan contributed 27 million euros to Renault.

Under the agreement, Renault will continue to receive dividends from shares held in trust until they are sold, Renault and analysts said.

A Bloomburg Intelligence analyst said that Renault's trimming of its Nissan stake to 15 percent potentially unlocks 4 billion euros before tax, which could help smooth a transition to full-electric vehicles. Nissan's investment into Renalt's planned EV spinoff, Ampere, could also generate economies of scale.   

Renault’s voting rights related to the 28 percent of Nissan in the trust will be “neutralized” for most decisions, the companies said, without listing exceptions. 

Nissan and Renault also said that they would work together on five operational projects, without being specific. A full announcement is expected on Feb. 6. 

The automakers have in the past collaborated on purchasing, platform development and some cross-manufacturing, although in some critical areas, notably electric vehicles and hybrid drivetrains, they have gone their separate ways. 

In November at a capital markets day, Renault CEO Luca de Meo outlined an ambitious plan to restructure the group, including Ampere, an EV spinoff that Nissan has pledged to invest in; Horse, a joint venture with Geely to build internal combustion engines; a circular-economy unit; and the core Power group, which would include the Renault and Dacia brands and back-office functions.

Financial analysts who cover Renault were optimistic about the announcement, with Bernstein saying that “untying the Gordian knot” that had blocked a rebalancing was critical to a recent upgrade of its shares to “outperform.” 
 
Jefferies said, “A re-sized capital structure should help keep the Alliance viable, maintaining synergies and opening up strategic opportunities on both sides.” The firm also raised its price target, to 46 euros from 43 euros. 

JPMorgan said that the intellectual property question could be solved by Renault’s ability to “ring fence its own technology within the alliance, allowing the firm to collaborate with external partners.”

It added that the agreement would open the door to more industrial cooperation, in particular reducing costs in Europe and Latin America. Renault is already planning to build the next Nissan Micra small car, which will be a full-electric version of the coming Renault 5. 

Jon Withaar, an Asia specialist at Pictet Asset Management said that overall the rebalancing was “neutral to mildly positive in the mid to long term.” 

“Ultimately it means that a disorderly unwind of the alliance has been avoided, which is a positive,” he said, adding that Nissan’s ability to exercise voting rights would act as a “guardrail to keep interests aligned between the two parties.”

Masayuki Kubota of Rakuten Securities said that equalizing the capital relationship will “raise the amount of freedom Nissan has in terms of management, making it easier to adopt a strategy that focuses on the United States, China and emerging markets."

Gregoire Laverne of Apicil Asset Management said that markets were waiting for more details, but that the reallocation of cross-shareholding “In a way it marks the failure of the first version of the alliance."

Reuters contributed to this report