After Years of Courtship, Renault and Nissan May Merge
Given the vast amount of already shared purchasing, engineering, and vehicle platforms between the alliance partners, an integration of the firms could be relatively rapid.
Media reports circulating on March 29 have purported that no-moat-rated Renault and
One impediment to the deal may be Nissan’s reluctance for the combined entity being partially owned by the French government. France currently owns approximately 20% of Renault common equity. While we believe that a merger would better enable the objective, integration would be relatively rapid given the vast amount of already shared purchasing, engineering, and vehicle platforms between the alliance partners.
Currently trading at 2 stars with a 25% premium to our EUR 79 fair value estimate, we view Renault shares as overvalued. However, we think investors should consider Nissan shares. The 4-star-rated ADRs currently trade at 21% discount to our $26 fair value, while the Tokyo-exchange-traded shares are at a 25% discount to our JPY 1,450 fair value estimate. We think Nissan shares are attractively valued relative to our estimates for revenue growth, profitability, and return on invested capital.
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