Renault’s Nissan upshot is mostly good news

HONG KONG, Feb 6 (Reuters Breakingviews) - The French automaker and its partner, Nissan (7201.T), confirmed on Monday that the Japanese giant will be buying up to 15% of Renault’s (RENA.PA) electric-car spinoff, Ampere. That number will steal the limelight, given that as late as last week, Nissan’s non-committal statement that it was “aiming to become a strategic shareholder” had left many options on the table.

The significant size of the investment will help to crystallise a valuation for the new business at a time when electric-car companies’ multiples are less extravagant than in the past. That should please Renault’s shareholders.

It however suggests that they will be waiting a long time to benefit from Renault’s planned sale of the 28.4% Nissan stake it will park in a non-voting trust. The sale was necessary to reduce Renault’s voting rights in its partner to 15%, on a par with the Japanese company’s interest in its own equity. Nissan’s commitment to Ampere could cost $1.6 billion at a mooted $10.8 billion valuation: that would leave the Japanese group, whose auto unit’s net cash has shrunk by about 30% since 2018, with less firepower for a buyback. Given that the deal also stipulates there will be no fixed timeline for the transaction, it could be a while coming. (By Katrina Hamlin)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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