Renault Puts Off Vote on Merger -- WSJ
05 Juni 2019 - 09:02AM
Dow Jones News
By Nick Kostov
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 5, 2019).
PARIS -- The board of Renault SA said it needs more time to
weigh a merger proposal from Fiat Chrysler Automobiles NV that
would create the world's third-largest auto maker by production,
with a market value of about $40 billion.
The French auto maker's board said Tuesday it "has decided to
continue to study with interest the opportunity of such a
combination and to extend the discussions on this subject," adding
that it would meet again Wednesday evening.
Renault directors haven't seen a final proposal from Fiat
Chrysler, according to people familiar with the board meeting.
Contours of a merger were still being negotiated as the board
met.
Lawyers for the two companies as well as the French state --
which holds a 15% stake in Renault -- were in the same building
finalizing deal terms ahead of Wednesday's board meeting. People
familiar with the negotiations said the board would be asked to
vote on a final proposal at that time.
"We'll spend the night there if we have to," one of the people
said.
One French official said there would be "no rushing" of the
negotiations. "There's no agreement on anything until there's
agreement on everything," the official said.
Fiat Chrysler's proposal aims to give both companies more scale
to cope with slowing sales and the rising cost of developing
electric vehicles and self-driving cars. If Renault and Fiat
Chrysler complete the merger, the combined company would produce
almost nine million passenger cars and light trucks a year, placing
it just behind Volkswagen AG and Toyota Motor Co. and ahead of
General Motors Co.
The negotiations represent a test of the European auto
industry's ability to overcome national economic rivalries and
establish a regional champion, akin to Airbus SE in aviation.
Fiat Chrysler sent Renault directors a merger proposal on May 26
that called for the combined business to be 50% owned by the
Italian-American company's shareholders and 50% by Renault
shareholders.
In recent days, the companies have been in discussions over such
matters as how to protect jobs in France and the length of
management mandates, people familiar with the matter said. Also at
issue, they said, is whether the French state would have a say in
appointing future CEOs and whether it would be guaranteed board
representation.
The different sides are also discussing standstill clauses to
ensure that the two companies stay equal after the deal and that it
doesn't become a takeover of one auto maker by the other, one of
the people said.
Complicating any deal is a 20-year-old partnership between
Renault and Nissan Motor Co. in which they share technology and
vehicle parts. Renault owns 43.4% of Nissan, while Nissan owns 15%
of Renault. Though Nissan is represented on Renault's board, the
Japanese company hasn't been involved in the merger talks, people
familiar with the discussions have said.
On Monday, French activist fund CIAM wrote to Renault directors
to challenge the conditions of the merger offer, saying the
combination "would benefit Fiat Chrysler significantly more than
Renault, both from an industrial and a financial point of
view."
The fund said valuing the two companies at their stock market
price -- which led Fiat Chrysler to offer its shareholders a
dividend of EUR2.5 billion ($2.81 billion) -- "appears to us to be
misleading and results in significantly undervaluing Renault."
CIAM estimates the merger proposal gives Renault's operations a
valuation of a negative EUR6 billion, excluding the company's
stakes in Nissan and Daimler AG as well as its auto-finance
operations.
On Tuesday, financial advisers from HSBC hired by Renault's
board presented directors with a financial analysis of the Fiat
Chrysler proposal, according to one of the people familiar with the
board meeting.
Directors also undertook other matters, including reviewing the
final findings of an audit into Carlos Ghosn's spending at the
company's Dutch joint-venture with Nissan. The former Renault
chairman is facing criminal charges in Japan, including allegations
that he abused his Nissan position for personal gain. Mr. Ghosn,
who was first arrested in November and is now free on bail, has
said he is innocent of all the allegations against him.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
June 05, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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