(Bloomberg) — Hon Hai Precision Industry Co., the iPhone maker known as Foxconn, is in talks with Nissan Motor Co.’s largest shareholder Renault SA over its willingness to sell its shares in the Japanese automaker, Taiwan’s Central said. News Agency, citing people it did not identify.
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Nissan and fellow Japanese automaker Honda Motor Co. are exploring a merger, people familiar with the matter said Wednesday, that would create a rival to Toyota Motor Corp. in Japan and better position the combined company to meet competitive challenges around the world.
A potential spanner in the works, however, is Foxconn, which is said to have separately approached Nissan about acquiring a stake. Foxconn has invested heavily in factories to build electric vehicles, and Nissan, which has lowered its profit forecasts and cut 9,000 jobs globally, needs a financial bailout.
According to the Central News Agency, Jun Seki, the chief strategy officer of Hon Hai’s EV division, told Nissan about Foxconn’s interest in buying its shares, but Nissan did not respond positively. As a result, Seki has started involving Nissan’s 36% shareholder, Renault.
Seki and his team are currently in discussions with Renault in France, the report said. Renault’s stake in Nissan is a remnant of a longstanding alliance between French carmaker Nissan and Mitsubishi Motors Corp.
Honda, meanwhile, has threatened to end its strategic software partnership with Nissan if it joins forces with Foxconn, Nikkei said in an earlier report. If Foxconn’s approach turns hostile after a rejection, Honda also offered to protect Nissan as a white knight investor, Nikkei said.
Official talks, including around a possible merger, between the two Japanese companies could start as early as December 23, Nikkei added.
Honda shares fell more than 2.5% in early trading on Thursday, while Nissan shares fell 6.5% after a record 24% rise on Wednesday.
Honda is considering several options, according to Executive Vice President Shinji Aoyama, including a merger, a capital seizure and even the creation of a holding company. The alliance could also include Mitsubishi Motors.
Representatives for Honda and Nissan did not immediately respond to requests for comment on the start date of the talks.
A merger of the Japanese car brands would create a bulwark against the Toyota Group at home and allow Honda and Nissan to pool their resources to compete with Tesla Inc. in global markets. and Chinese automakers such as BYD Co.
“It is only natural that consolidation of major automakers becomes more common as the industry shifts toward advanced technology vehicles,” Subaru Corp. said. CEO Atsushi Osaki during a group interview in Tokyo on Wednesday. “We must come together to tackle challenges that are too difficult to overcome alone.”
Renault has indicated it is open to the idea of a merger between Honda and Nissan, people familiar with the situation said. Its approval will be critical to any deal.
–With help from Tsuyoshi Inajima.
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