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

Shares of Japanese automaker Honda were on track for their best day in 16 years after it announced to buy back up to 1.1 trillion yen ($7 billion) of its shares on Monday amid merger talks with Nissan.

Nissan and Honda said they had begun official negotiations to merge, which could catapult them to the world’s third-largest carmaker by sales.

Honda also announced to buy back 24% of its issued shares by Dec. 23 next year. Its shares were last up 15.51%, and would clock their best day since October 2008, if gains hold. Nissan shares fell over 1%.

The Honda-Nissan deal would 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, they are operating in the same market, and they have very similar brand images, they 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 also extend the business,” he added. 

Discussions are set 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 yen. The automakers would have a combined value of nearly $54 billion, with Honda’s market capitalization contributing the greater $43 billion share.

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

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

—CNBC’s Jenni Reid contributed to this report.