Renault-Nissan's French peace deal leaves investors underwhelmed

Fri Dec 11, 2015 11:52pm EST
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By Laurence Frost and Gilles Guillaume

PARIS (Reuters) - The Renault-Nissan alliance drew a line under an eight-month power struggle with the French government on Friday, with a compromise deal balancing increased state influence at Renault with weakened control over its Japanese affiliate.

The agreement, offering Nissan (7201.T: Quote) guarantees against future interference by parent Renault (RENA.PA: Quote) or its own biggest shareholder, the French state, came as a relief to Renault staff while disappointing some investors who had hoped for bigger changes to the 16-year-old carmaking alliance.

Tension had been building since April, when Economy Minister Emmanuel Macron temporarily raised France's Renault stake to secure a permanent increase in its voting rights - and enough clout to veto strategic decisions or tie-ups that might one day endanger domestic jobs or other national interests.

That move raised hackles at Nissan, 43.4 percent-owned by Renault, and infuriated alliance Chief Executive Carlos Ghosn, who has headed both carmakers for the last decade.

Renault shares fell on Friday after its board approved two new contracts to cap the French state's increased weight in non-strategic shareholder votes and effectively abandon Renault's right to control Nissan strategy.

"We've certainly lost a bit, but Nissan has accepted that France has increased voting rights on important strategic questions," one Renault manager said.

Nissan said it was "very pleased" with the agreement, having earlier threatened to exit the carmakers' 2002 alliance agreement unless a deal was reached by Friday, a move that would immediately free it to raise its 15 percent Renault stake. An increase to 25 percent would cancel Renault's voting rights in Nissan under Japanese law, effectively ending French control.

Instead, the deal allows Nissan to lift its Renault holding to 25 percent - or beyond - only in the event of interference by Renault or by Paris that breaches the new undertakings.   Continued...

Carlos Ghosn, chief executive officer of Nissan Motor Co and Renault SA, poses in front of the Nissan Teatro for Dayz concept car at the 44th Tokyo Motor Show in Tokyo October 28, 2015.  REUTERS/Thomas Peter