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Nissan's Ghosn crisis

Renault plans sweeteners to win over Nissan on merger

Proposal includes headquarters outside Europe and equal board members

Workers on a Nissan Micra assembly line at a Renault plant near Paris.   © Reuters

TOKYO -- France's Renault is set to propose a merger with Nissan Motor under a holding company that would give both automakers equal board representation, Nikkei learned Friday, an offer designed to persuade the Japanese partner skeptical of the plan.

The holding company's headquarters would be set up in a country other than France or Japan, with both automakers entitled to name equal numbers of executives. Renault will formally present the proposal to the Japanese automaker soon, kicking off negotiations to decide the future of the alliance that ranks as the world's No. 2 automaker.

Nissan rejected an informal merger proposal by Renault on April 12, first reported by Nikkei this week. The French carmaker is pressing ahead, however, stressing an "equal partnership" in the plan to convince the reluctant Japanese company. Negotiations are likely to bog down.

Nissan President and CEO Hiroto Saikawa sounded skeptical when asked about Renault's plan, saying that "we haven't heard anything yet" and that "now is not the time for this."

Nissan and Renault stocks would be valued equally when shareholders exchange their holdings with shares in the new holding company, which would own 100% of each carmaker. The French government's 15% stake in Renault would become a 7% interest in the holding company. Nissan would retain ownership of the 34% stake in Mitsubishi Motors, the third partner in the alliance.

The headquarters could be located outside Europe, in such places as Singapore. Renault was apparently concerned that Nissan would oppose having the head office near France. The holding company's stock would be listed in both Tokyo and Paris.

If the headquarters is outside Europe, the entity will no longer be under the sway of French law. The so-called Florange law grants double voting rights for shares registered longer than two years. So while the French government has a 15% stake in Renault, it actually controls nearly 30% of the voting rights.

Although Renault is offering various sweeteners, the proposal still appears a far cry from what Nissan is seeking.

The Japanese company has long been suspicious of Paris's influence over Renault and, indirectly, over its own operations. Renault owns 43.3% of Nissan, which in turn has 15% of the French group but without voting rights.

Nissan has argued that the capital relationship needs to be more equal, as the Japanese group generates a larger share of profits and its market value of about 3.8 trillion yen ($34 billion) dwarfs Renault's nearly 2.2 trillion.

Resentment has been building inside Nissan for some time over attempts to bring the two companies closer together under previous Chairman Carlos Ghosn, who held the same post at Renault.

Renault's approach comes as the Japanese company this week announced its second profit warning of the year, forecasting that operating profit declined 45% for the full year ended March 31.

Reliant on Nissan for technology development, Renault has been eager to cement the partnership through an integration. Weak earnings have given the French automaker a sense of urgency.

At an earnings announcement Friday, Renault Chief Financial Officer Clotilde Delbos said Renault seeks to make the alliance "irreversible."

Renault Chairman Jean-Dominique Senard first pitched the merger sometime around the alliance operating board meeting April 12, which brings together the leaders of the two carmakers and Mitsubishi Motors. Saikawa shot the idea down on the spot.

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