Nissan shares surge 23% on reports of merger talks with Honda

On By Littum

Upper line

Nissan Motor shares rose sharply on Wednesday morning after reports emerged that the company had entered into talks on a merger with fellow Japanese automaker Honda, in a move aimed at helping Nissan wade through an ongoing crisis and reportedly provide the opportunity for the Japanese companies to compete better against electric vehicle rivals from China and Tesla.

Key facts

According to Nikkei Asiawhich first reported the merger talks, the two automakers are discussing the possibility of operating under a single holding company that would allow them to pool their resources to take on new rivals.

The report said the size of each of the two automakers’ shares in the new holding company and other financial details of the merger have yet to be decided.

The merged entity also plans to eventually bring Mitsubishi Motors – whose top shareholder is Nissan – on board, the report added.

In one Tokyo Stock Exchange filingNissan said it is considering “various ways of future cooperation” with Honda and Mitsubishi as part of a strategic partnership that was announced earlier this year, “including some matters reported in the press … but nothing has been definitively concluded at this time.”

Honda also issued one similar statement in a regulatory filing, noting that the media reports are not based on any official announcements from the company.

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How did the market react to the Honda-Nissan merger reports?

Nissan shares rose 23.70% to JPY 417.6 ($2.72) in morning trading in Tokyo on Wednesday, pausing trading as it hit the upper limit of a single-day swing. Mitsubishi Motor Corp’s share price rose 19.65% to JPY 487 ($3.17) after the news was reported. Shares in Honda Motors – the largest of the three companies – rose initially but eventually fell to JPY 1,233 ($8.04), down nearly 4% from the previous day. Shares of Japan’s largest automaker Toyota — which will continue to hold that crown even if this merger goes through — rose nearly 2% to JPY 2,725 ($17.76).