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Dust to Dust

10 June 2019 by jbchevrel

Fiat (FCAIM) and Renault (RENAUL) are reportedly looking for ways to revive merger plans. In particular, they need to get Nissan (NSANY) green light, according to Reuters. The respective chairmen reportedly talked about reviving the plan and are apparently still enthusiastic about a megadeal. Within the existing alliance, NSANY reportedly asks RENAUL to reduce its stake in it, in exchange for supporting a combination with FCAIM. FCAIM has also reportedly floated the idea of a call option that would allow NSANY to increase its 7.5% stake in the combined proforma FCAIM-RENAUL. Meanwhile, the French government has also showed some signs of willingness to reduce its stake in RENAUL (“we can reduce the state’s stake in Renault’s capital. This is not a problem as long as, at the end of the process, we have a more solid auto sector and a more solid alliance between the two great car manufacturers Nissan and Renault”, MOF Le Maire) before saying that it was not as urgent as to strengthen the existing alliance RENAUL-NSANY. According to the FT, RENAUL has told NSANY that it will block the company’s plan to overhaul its corporate governance. RENAUL chairman wrote to NSANY CEO that RENAUL had decided to abstain from the AGM vote, thus denying the proposal for which 2/3 votes are required. NSANY said that it thought that RENAUL stance on the matter was regrettable, in what looks more and more like a tit-for-tat game. It is not clear how NSANY will react, but it feels like the prospect of a RENAUL-NSANY merger is completely removed and if anything the complete opposite may be more likely, especially if it can help RENAUL to push through a deal with FCAIM. As far as our world is concerned, the respective CDS didn’t move much today. Indeed, we see both names tighter by 3bp or so, against a very risk-on backdrop that saw the Main tighten more than 2bp and the Crossover by more than 9bp.