Nissan to buy back $3.5 billion in shares

After adding capacity in China, Mexico, Brazil and Thailand in the past few years, Japan's second-biggest automaker doesn't have pressing investment needs, which frees up cash to buy back shares, analysts say. Photo credit: BLOOMBERG

TOKYO (Bloomberg) -- Nissan Motor Co., boosting earnings on rising sales in the U.S. and China, will acquire up to 400 billion yen ($3.5 billion) of stock in a bid to shore up its share price after a 24 percent decline this year.

The Japanese automaker will buy back as many as 300 million shares, or 6.7 percent of issued stock, it said in a Tokyo Stock Exchange filing Friday.

The company and alliance partner Renault SA agreed that the French automaker will sell shares in Nissan, to maintain its holding at 43.4 percent, according to the filing.

"Return to shareholders is one of Nissan's key objectives," Carlos Ghosn, CEO of both Nissan and Renault, said in a statement. "We took this decision considering our financial status and outlook to continuously generate significant free cash flow."

Nissan's decision to buy back shares comes two months after the Japanese company failed in its effort to activate voting rights in Renault.

That preserved France's status as having more say in the alliance than Nissan.

After adding capacity in China, Mexico, Brazil and Thailand in the past few years, Japan's second-biggest carmaker doesn't have pressing investment needs, which frees up cash to buy back shares, according to Ashvin Chotai, managing director of Intelligence Automotive Asia in London.

Nissan had 860 billion yen of cash and short-term investments as of Dec. 31, according to data compiled by Bloomberg.

"The price-to-earnings ratio is very low today and this is clearly a good time for them to reduce the number of shares outstanding," said Chotai. "I'm encouraged to see it means that the company thinks their shares are undervalued now."

Nissan shares have trailed the 15 percent fall in the benchmark Topix index this year. Nissan has forecast its net income to rise to a record 535 billion yen in the year through March, helped by strong demand in the U.S. for models including the Rogue crossover.

The automaker will buy back the shares through Dec. 22.

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