Renault and Nissan Reach Tentative Agreement to Reset Alliance; No Change to Fair Value Estimates

Subject to board of directors approval, Renault announced it had reached an agreement with alliance partner Nissan, in which cross-shareholding would be equalized, Nissan would make an investment in Ampere, and alliance operational projects are identified. Ever since the arrest of Carlos Ghosn in 2018, both management teams have been distracted by areas of contention within the alliance. While both companies have made substantial turnaround progress, we see the agreement as an important step to further improve performance, enabling the alliance to better leverage its existing economies-of-scale as management focuses attention on operations instead of internal conflict. The 5-star, no-moat-rated shares of Renault are attractively valued, currently trading at a 54% discount to our EUR 83 fair value estimate. No-moat, 5-star-rated Nissan shares trade at a compelling 71% discount to our JPY 1,550 fair value.