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A sign marks the location of a Honda dealership in Libertyville, Illinois, on December 18, 2024.
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Shares of the Japanese car manufacturer Honda they were on track for their best day in 16 years announced to recover up to 1.1 trillion yen ($7 billion) of its shares on Monday amid merger talks with Nissan.
Nissan and Honda said they had started official negotiations to joinwhich could catapult it to the third largest carmaker in the world by sales.
Honda also announced to buy 24% of its issued shares from December 23 next year. Its shares were last up 15.51%, and would have their best day since October 2008 if the gains hold. Nissan shares fell more than 1%.
The Honda-Nissan agreement focuses on sharing knowledge and resources, achieving economies of scale and creating synergies, Honda CEO Toshihiro Mibe said. A holding company will be established as the parent organization for Honda and Nissan, and will be listed on the Tokyo Stock Exchange.
“These two companies, they operate in the same market, and they have very similar brand images, they have very similar products,” Hakan Dogu, president of Alagan Mobility Solutions, told CNBC on Tuesday.
“The new management has a great challenge to differentiate the range of products and also to expand the business,” he added.
Honda shares over the year
The talks are set to conclude in June 2025.
Nissan’s strategic partner, Mitsubishi, has been given the opportunity to join the new group and is expected to make a decision by the end of January 2025.
Honda reported 1.382 trillion yen in operating profit for the full year to March 2024, versus Nissan’s 568.7 billion yen. The automakers would have a combined value of nearly $54 billion, with Honda’s market capitalization contributing the largest share of $43 billion.
Analysts suggest that the potential merger stems from Nissan’s financial struggles and the restructuring of its long-standing partnership with France’s Renault.
In its latest quarterly report, Nissan has announced plans to cut 9,000 jobs and reduce its global production capacity by 20%.
— CNBC’s Jenni Reid contributed to this report.
