Renault Group disclosed plans to sell up to 211 million Nissan shares, equivalent to approximately 5% of Nissan’s capital. This transaction is a segment of Renault’s strategic realignment and follows the transfer of 28.4% of Nissan shares into a French trust on November 8, 2023.
Share sale implementation and share buyback program
The divestment is scheduled to align with Nissan’s share buyback program, set in motion on December 12, 2023, with execution slated for December 13, 2023. This initiative adheres to the New Alliance Agreement, maintaining cross-shareholdings between Renault Group and Nissan at 15%.
Financial implications of the sale
Hypothetically, based on a maximum of 211 million Nissan shares being sold at a share price of JPY 568.5, Renault Group anticipates:
- A disposal value of up to EUR 765 million, contributing to an enhanced net financial position in Renault Group’s Automotive segment.
- A capital loss on disposal, reaching a potential EUR 1.5 billion. This loss, categorized under “other operating income and expenses,” is isolated from the Group’s operating income and may be subject to adjustments in alignment with Nissan’s capital allocation strategy.
- A capital gain on disposal, estimated at a maximum of EUR 50 million, reflected in the statements of Renault S.A.
Importantly, the sale will not affect the remaining Nissan shares in the balance sheets of Renault Group and Renault S.A.
Strategic capital allocation strategy
This share sale aligns with Renault Group’s two-phase capital allocation strategy:
Phase 1: Strategic projects and financial health
Renault Group’s initial phase involves the implementation of strategic projects under the “Revolution” phase, including initiatives such as Ampere and Horse. Simultaneously, there is a concerted effort to enhance operating performance, generate free cash flow, and reduce debt.
The foremost objective remains securing an investment-grade credit rating. Until this milestone is reached, Renault Group will adhere to its dividend policy, gradually increasing the pay-out ratio up to 35% of net income – Group share. The Group will also persist with employee shareholding plans, targeting 10% employee shareholders by 2030.
As outlined during the Capital Market Day in November 2022, Renault Group is committed to reinvesting a minimum of 50% of excess cash generated by the Group. Additionally, the company plans to allocate a maximum of 15 to 20% of its free cash flow to financial investments, contingent on alignment with the Group’s ROCE targets.
Phase 2: Future development and returns to shareholders
The subsequent phase involves the further development of Renault Group around its various value chains and a focus on returning value to shareholders.
This strategic move underlines Renault Group’s commitment to adapting to evolving market dynamics, optimizing its financial position, and positioning itself for sustained growth in the automotive sector.
Renault Group has not only established a clear roadmap for its future but also navigates a path that ensures agility and adaptability in an ever-changing automotive landscape.