The Renault-Nissan Alliance 2
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Transcript of The Renault-Nissan Alliance 2
The Renault-Nissan Alliance
2
1998 Snapshot
0
❐ Sales: FF 243,934 million($ 40,552 million)
❐ Production: 2,197,395 units
❐ Employees: 138,321
❐ Sales: ¥ 6,565bn($ 49,732m)
❐ Production: 2,754,598 units
❐ Employees: 137,201
$ 1 = FF 6.02 As per annual report (March 31st, 1998)
Year ended on December 31st, 1998 Year ended on March 31st, 1998
3
Transaction Rationale: Existing Rankings
14.9% 14.9%
10.0%
9.0%8.4%
5.0% 4.9%4.3% 4.3% 4.3%
2.9%2.4% 2.4% 2.3%
1.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
GM
(+
Isuz
u)
For
d (+
Vol
vo+
Maz
da)
Toy
ota
(+ D
aiha
tsu)
VA
G
Dai
mle
r-C
hrys
ler
Fia
t
Nis
san
Hon
da
Ren
ault
PS
A
MM
C
Hyu
ndai
(+
Kia
)
Suz
uki
BM
W (
+R
over
)
Dae
woo
(+S
sang
yong
)
Source: CCFA December 1998. Based on production figures
4
Transaction Rationale: Combined Rankings
14.9% 14.9%
10.0%
9.1% 9.0%8.4%
5.0% 4.9%4.3% 4.3% 4.3%
2.9%2.4% 2.4% 2.3%
1.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
GM
(+
Isuz
u)
For
d (+
Vol
vo+
Maz
da)
Toy
ota
(+ D
aiha
tsu)
Ren
ault
+N
issa
n
VA
G
Dai
mle
r-C
hrys
ler
Fia
t
Nis
san
Hon
da
Ren
ault
PS
A
MM
C
Hyu
ndai
(+
Kia
)
Suz
uki
BM
W (
+R
over
)
Dae
woo
(+S
sang
yong
)
Source: CCFA December 1998. Based on production figures
Combined, Renault and Nissan will create the number 4 car manufacturer
in the world with a market share of 9.1%
5
Vol: 70
Mkt Sh : 5,8%
Vol: 4
Mkt Sh : 0,3%
Vol: 1
Mkt Sh : 0,1%
Vol: 2
Mkt Sh : 0,1%
Vol: 114
Mkt Sh : 7,9%
Vol: 108
Mkt Sh : 5,1%Vol: 10
Mkt Sh : 2,0 %
Vol: 17
Mkt Sh: 1,4 %
Vol: 2
Mkt Sh : 0,3%
Western Europe
South America
ChinaEastern Europe
N. Africa, ME, TurkeyAfrica
Russia, CEI
Central America
Australasia
ASEAN (*)
Vol: 1,758
Mkt Sh: 11.0%
N.B. : Volumes in thousand of units ; Source: Renault (*) Includes Hong Kong and Taiwan
1998 Estimated market shares of Renault by Geographical Area
Transaction Rationale: Markets Complementarity
6
N.B. : Volumes in thousand of units ; Source: Nissan (*) Includes Hong Kong and Taiwan
North America
Japan
Vol: 19
Mkt Sh: 1,6%
Vol: 8
Mkt Sh: 0,6%Vol: 15
Mkt Sh: 1,1%
Vol: 122
Mkt Sh: 10,8%Vol: 48
Mkt Sh: 5,9%
Vol: 132
Mkt Sh: 9,1%
Vol: 28
Mkt Sh: 5,6%Vol: 19
Mkt Sh: 0,9%
Vol: 171
Mkt Sh: 14,3%
Vol: 493
Mkt Sh: 3,1%Vol: 655
Mkt Sh: 4,0%
Vol: 903
Mkt Sh: 15,3%
Western Europe
South America
ChinaEastern Europe
N. Africa, ME, TurkeyAfrica
Russia, CEI
Central America
Australasia
ASEAN (*)
1998 Estimated market shares of Nissan by Geographical AreaTransaction Rationale: Markets Complementarity
7
Transaction Rationale: Markets Complementarity
Vol: 2,251
Mkt Sh: 14,1%
Vol: 12
Mkt Sh: 0,9%
Vol: 124
Mkt Sh: 10,9%Vol: 50
Mkt Sh: 6,2%Vol: 38
Mkt Sh: 7,6%
Vol: 16
Mkt Sh: 1,2%
Vol: 903
Mkt Sh: 15,3%
Vol: 655
Mkt Sh: 4,0%Vol: 89
Mkt Sh: 9,0%
Vol: 127
Mkt Sh: 6,0%
Vol: 246
Mkt Sh:17,0%Vol: 188
Mkt Sh:15,7%
North America
Japan
Western Europe
South America
ChinaEastern Europe
N. Africa, ME, TurkeyAfrica
Russia, CEI
Central America
Australasia ASEAN (*)
N.B. : Volumes in thousand of units; Source: Renault and Nissan (*) Includes Hong Kong and Taiwan
1998 Estimated market shares of the Alliance by Geographical Area❏ Leading market share in Europe and Japan❏ Global presence
8
Transaction Rationale: Fit of Product Range
Source: Company
0 100
200
300
400
500
600
700
800
900
Sub B
B
C
D
E+F+G
Vans
4x4
Pick-up
LCV
0100
200
300
400
500
600
700
800
900
Twingo
Clio, R5
Mégane, R 19
Laguna
Safrane, Spider
Espace
Express, Kangoo VU & VP, Trafic, Master
March, Micra, Cube
Almera, Sunny
Bluebird, Primera
Altima, Maxima, Infiniti, Q45, Cedric
Quest, Elgrand, Prairie
Safari, Patrol, Terrano
Pick-up
Atlas Civilian
The product lines are strong in key segments and complementary in all categories
9
Transaction Rationale: Production Sites Complementarity
8
0 0
2
7
3
0
2
4
6
8
10
Europe Japan USA & Mexico
Renault Nissan
3
0 0
1
6
3
0
2
4
6
8
10
Europe Japan USA & Mexico
Renault Nissan
Assembly Plants Engine Plants
Number of Sites
per region
Number of Sites
per region
10
Transaction Rationale: Complementary Expertise
- Cost Management - Global Platform and
Purchasing Strategy- Innovative Product & Styling
- Advanced Engineering and Technology
- Plant Productivity- Quality Management
Renault and Nissan’s areas of operating strengths are complementary and will be exploited to achieve improved revenue and earning growth
11
Transaction Rationale: Potential Synergies
(*): Based on sales of Renault and calendarized sales of Nissan as of December 31st, 1998(**): Other includes (i) Additional sales ; (ii) R&D ; (iii) SG&A ; (iv) Vehicle and engine assembly and other production costs ; (v) Capital expenditures savings
(US$ millions)
370471
1,400
607 657
1,600
120142
183
100105
0
500
1,000
1,500
2,000
2,500
3,000
2000E 2001E 2002E 2005E
Revenue enhancement Purchasing Manufacturing costsSG&A R&D
568(0.6%)*
1,182(1.2%)*
1,573(1.7%)*
3,000(3.2%)*
Other**
R&D = 41SG&A = 20Add’l Rev. = 16
Estimates based on Joint Studies
491
12
The Renault-Nissan Alliance: Why
❏ Excellent fit in terms of markets, products and production sites
❏ Outstanding complementarity of operating strengths
❏ The Alliance will generate significantly improved revenue and earnings growth
❏ Strong cost savings targeted through commonalization of platforms and powertrains and through mutual support
❏ Management teams have worked closely together since July 1998. The cultural fit is promising
❏ Renault has completed extensive due diligence and has reached a good understanding of Nissan’s situation
❏ Renault will contribute to Nissan’s Global Reform Plan (reduction of debt and costs) through:
➢ Capital injection
➢ Senior management support
➢ Realisation of synergies
The Alliance will create high value for both Renault and Nissan shareholders
13
Transaction Summary
❏ Nissan Motor 590.7 30,061 4,997 36.8%
❏ Nissan Diesel 9.3 473 79 22.5%
❏ European Financing Subsidiaries 37.8 1,923 320 100.0%
❏ Nissan’s South African Subsidiary 5.0 254 42
❏ Total Investment 642.8 32,711 5,438
❏ The transaction is only subject to regulatory approvals. Closing should take place by the end of May.
Net Investment Ownership
¥ bn FF m $ m
FF 1 = ¥ 19.65; $1 = ¥ 118.20 ; 1$ = FF 6.02
Minority interest
14
Transaction Summary: Terms of investment in Nissan Motor
❏ Renault will subscribe to a reserved capital increase in Nissan :
➢ 1,464 million shares bringing the total number of shares outstanding to 3,977 million
➢ ¥ 400 / share
✦ Share price as of [19/03/99]: ¥ 429
✦ 1-month-average: ¥ 453
✦ 3-month-average: ¥ 409
➢ Resulting ownership: 36.8%
Renault is paying a fair market price without premium
15
Transaction Summary: Terms of investment in Nissan Motor
❏ Additionally, Renault will acquire warrants for 540 million shares
➢ Exercise price: ¥ 400
➢ Maturity: 5 years
➢ Exercisable at any time up to a maximum of 39.9% in the first 4 years
➢ Exercisable with no restriction in year 5
➢ Warrants will be attached to ¥ 216 bn ($ 1,827 m) of 5-year bonds. These bonds will be immediately purchased by Nissan’s main banks and will strengthen Nissan’s financial structure
As part of this long term partnership, Renault has the flexibility to increase its participation
$1 = ¥ 118.20
16
Transaction Summary: Implementation of the Alliance
• Identify,• Study,• Propose
Vehicle
EngineeringPowertrains
Purchase
& Supply
Product Planning &
Related Strategy
Cross Company Teams
Global Alliance Committee
•Headed by Renault’s CEO and
Nissan’s President
•Senior Executives: 5 from
Renault and 5 from Nissan
Marketing
& Sales
by region
Cross Company Teams identify and propose synergies for the Alliance.
Renault and Nissan implement them
• Decide
• Implement
17
Renault’s Contribution to Nissan’ RecoveryNissan’s Global Reform Plan Targets
Renault’s Contribution to Nissan’s Recovery
❏ Improve financial position through sale of non-core assets and inventory reduction
❏ Reduce number of platforms and models
❏ Improve production efficiency
❏ Reduce sales and distribution costs in Japan
❏ Launch new models, reduce production costs and inventory levels in the US
❏ Review and strengthen current restructuring plan
❏ Improve financial structure through
➢ Capital injection
➢ Debt consolidation
❏ Develop synergies: total combined amount of US$ 3.3 bn over the 2000-2002 period
18
Impact of the Transaction on Renault’s Financials
❏ Renault’s investment in Nissan Motor and Nissan Diesel accounted for under the equity method:
➢ No consolidation of debt
➢ Goodwill amortisation over 20 years estimated at approximately FF 300m ($ 50m) per year
❏ Renault is not responsible for Nissan’s indebtedness
❏ The investment will be financed through cash and debt
❏ The impact on Renault’s financial income is approximately FF 1,100m ($ 183m) on a full year basis, i.e. FF 700m ($ 116m) after tax.
Transaction structure minimizes Renault’s financial risk
1 $ = 6.02 FF