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Renault still in control of Nissan

PARIS — Despite the talk about a more balanced relationship, last week’s equity reshuffle between Renault SA and Nissan Motor Co. Ltd. leaves Renault’s commanding position within the alliance undiluted.

Among the changes announced Tuesday, Oct. 30:

  • Renault raised its ownership in Nissan from 36.8 percent to 44.4 percent, at a cost of $1.8 billion.

  • Nissan took a 15 percent stake in Renault through the purchase of 42 million shares of stock, at a price yet to be determined. The shares do not give Nissan voting rights.

  • A new corporate entity, Renault Nissan BV, was created in the Netherlands to help the automakers thwart any unwanted takeover attempt.

    The companies presented the changes to their initial March 1999 accord as a reward to Nissan employees for their contribution to the Japanese carmaker’s recovery, and as a step toward more efficient cooperation.

    Nissan CEO Carlos Ghosn said the motivation of Nissan employees was a key reason behind the changes, notably the 15 percent stake Nissan is taking in Renault.

    Power balance unchanged

    But a closer look at the new structure leaves many observers puzzled.

    “The combination between the two companies makes a lot of sense, but it’s not particularly clear how the latest changes mark an improvement,” said Jim Collins, an analyst with UBS Warburg in London.

    Take Renault Nissan BV, which the companies said has “sole responsibility for mid- and long-term planning, commonality in products and powertrains, and on principles of financial policy.

    Renault Chairman Louis Schweitz-er has the deciding vote within the entity’s eight-member board. Schweitzer also ruled out any prospect of rotating the Renault Nissan BV presidency between Renault and Nissan. He also reaffirmed his opposition to a merger between the two companies.

    Another case in point is the 15 percent stake Nissan is taking in Renault. The stake will be devoid of voting rights, making it a purely symbolic move. Schweitzer said an increase in Nissan’s equity in Renault was not on the agenda.

    Poison pill

    One of the most novel features in the new arrangement is a trap for potential corporate predators. Under Dutch law, Renault Nissan BV can be linked with a special foundation that will have the power to thwart an unsolicited takeover bid.

    This poison pill will be useful since the French government is using the Renault-Nissan share reshuffle to slash its 44.2 percent shareholding to 25 percent when market conditions are right.

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