Honda shares best day in more than 16 years on share buyback plan, Nissan deal

Shares of a Japanese car manufacturer Honda were on course for their best day in 16 years since announced a buyback of up to ¥1.1 trillion ($7 billion) of its shares on Monday amid merger talks with Nissan.

Nissan and Honda said they started formal merger talkswhich could catapult them to the world’s third largest selling car manufacturer.

Honda also announced that it will buy back 24% of its issued shares by December 23 next year. Its shares were last up 15.51% and would post their best day since October 2008 if the gains hold. Nissan shares fell more than 1%.

The Honda-Nissan deal will focus on sharing knowledge and resources, achieving economies of scale and creating synergies, Honda CEO Toshihiro Mibe said. A holding company will be established as the parent organization for both Honda and Nissan and will be listed on the Tokyo Stock Exchange.

“These two companies operate in the same market and have very similar brand images, have very similar products,” Hakan Dogu, chairman of Alagan Mobility Solutions, told CNBC on Tuesday.

“The new management has a big challenge to differentiate the product range and grow the business,” he added.

Discussions are expected to conclude in June 2025.

Nissan’s strategic partner, Mitsubishi, has been given the opportunity to join the new group and is expected to make a decision by the end of January 2025.

Honda reported 1.382 trillion yen in operating profit for the full year to March 2024. versus Nissan’s ¥568.7 billion. The automakers will have a combined value of nearly $54 billion, with Honda’s market cap contributing the larger share of $43 billion.

Analysts speculated that the potential merger stems from Nissan’s financial difficulties and the restructuring of its long-standing partnership with France’s Renault.

In its latest quarterly report, Nissan has announced plans to cut 9,000 jobs and reduce its global production capacity by 20%.

— CNBC’s Jenny Reid contributed to this report.