Nissan and Renault double down on long-term JV​

By Jake Rickman
Image Credit - Memory Stockphoto / Shutterstock.com​

What do you need to know this week?

On Monday, the French auto-maker Renault and Japanese manufacturer Nissan announced a renewed agreement that will extend their 24-year-old joint venture, according to the FT. This comes after a protracted period of negotiations dating back to 2018, when the former-CEO of the alliance, Carlos Ghosn, was arrested by French authorities for suspected financial misconduct. There were concerns that without Ghosn’s leadership, the alliance would fall apart. Clearly not!

Insiders reported that the negotiations between the two groups were fraught, reflecting tensions that emerged in the alliance between the two companies which one insider characterised as a breakdown of communications. The renewal now means the alliance can double down on its Road to 2023 strategy.

The key terms of the renewal include:
  • Renault equalising its equity stake in Nissan from 43% to 15% by transferring its remaining shares to a French trust (to be sold at a later date at Renault’s discretion);
  • Renault obtaining voting rights in the Nissan shares; and
  • Nissan gaining a minority stake in Renault’s electric vehicle (EV) spinoff Ampere (which Renault intends to take public at some point) along with interests in other joint production plans.
Why is this important for your interviews?

This development is topical for at least two reasons:
  1. The worldwide equity market is seeing a dearth of IPOs, which makes minority-stake investments and alliances and joint-ventures structured through equity commitments an alternative way for professional advisers in the equity markets including law firms to offset the declining fees.
  2. From the perspective of the auto-industry, the Renault-Nissan Alliance has long been regarded as a bold, unique, and broadly successful arrangement. If you are interested in manufacturing, especially in the auto-sector, understanding the strategic and legal basis for the alliance will demonstrate your commercial aptitude.
From a legal and commercial perspective, the structure of the alliance between Renault and Nissan is unique because it is neither a straightforward minority acquisition nor a joint venture structured through a separate entity. Instead, it is something of an “inter-firm partnership”, as each auto group has a participatory stake in the other’s long-term performance. This requires careful coordination to maximise the resources available for each group.

From a performance point of view, the arrangement has produced demonstrable evidence of success. 1 out of 10 cars sold worldwide are either Renaults or Nissans and the two makers together produce two of the top-selling cars: the Renault Zoe and Nissan Leaf, respectively.

How is this topic relevant to law firms?

There is nothing concrete as to which firms advised the two auto groups on the renewal, but Latham & Watkins has long since served as Nissan’s chief counsel since the 1980s, according to Bloomberg Law.