During the trading session on Tuesday, shares of Honda Motor Co. surged 15.51%, marking their most significant daily gain in 16 years, following the announcement of a robust share buyback plan and ongoing merger negotiations with Nissan Motor Co.
The Japanese automaker intends to repurchase up to 1.1 trillion yen ($7 billion) worth of its shares, reclaiming 24% of its issued shares by December 23 of the following year, amid merger plans that could elevate the combined entity to the status of the world’s third-largest automaker by sales.
The strategic merger, poised to leverage shared expertise and resources, aims to achieve economies of scale and develop synergies, according to Honda’s CEO Toshihiro Mibe. Plans include the establishment of a parent holding company, to be publicly listed on the Tokyo Stock Exchange, for both car manufacturers.
Meanwhile, Hakan Dogu, chairman of Alagan Mobility Solutions, noted that as Honda and Nissan operate within the same market and share similar brand images and products, the newly formed management team would face the significant challenge of distinguishing their product lines and expanding the business.
The merger talks are expected to conclude by June 2025, with Nissan’s ally, Mitsubishi Motors Corp., invited to join the alliance and expected to decide by January 2025.
In terms of financial performance, Honda reported an operating profit of 1.382 trillion yen for the fiscal year ending March 2024, overshadowing Nissan’s 568.7 billion yen. The potential merger would amass a combined market value approaching $54 billion, with Honda contributing $43 billion of that valuation.
Analysts suggest that Nissan’s ongoing financial difficulties and the revamp of its enduring partnership with France’s Renault are motivators behind this merger exploration. Facing operational challenges, Nissan revealed plans to slash 9,000 positions and cut global production capacity by 20% in its recent quarterly report.
