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(Bloomberg) -- Hon Hai Precision Industry Co., the Taiwan-based manufacturer of iPhones known as Foxconn, is putting its interest in pursuing Nissan Motor Co. on hold while the Japanese automaker is in negotiations for a potential merger with Honda Motor Co., according to a person familiar with the matter.
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The decision to pause comes after Foxconn sent a delegation to meet with Renault SA — which owns 36% of Nissan and will have a say in any tie-up — in France, people with knowledge of the matter said.
But the smartphone-maker, which has long-standing ambitions to break into the electric vehicle industry, is not giving up completely, preferring to see if the two Japanese marques make legitimate progress towards a deal before deciding on its next move, the people said, asking not to be identified discussing private decisions.
Foxconn’s pause is the latest development in the unexpected emergence of two suitors for the ailing Japanese carmaker, which is struggling to turn around cratering profitability and dwindling market share. Honda and Nissan, which have flirted with a tie-up for several years, appear to have accelerated work on a potential merger after Foxconn approached Nissan about buying the entire company.
It’s not clear whether Nissan has engaged in substantial discussions with Foxconn, or already rebuffed the Taiwanese company. But Foxconn would likely not have been able to outbid or out-maneuver Honda in a takeover battle, given the close domestic ties between the Japanese companies.
Foxconn did not respond to requests for comment. A media representative for Renault declined to comment.
A potential combination of Honda and Nissan would effectively consolidate the Japanese auto industry into two main camps and provide them with more resources to compete with larger peers globally after downsizing long-held partnerships with other carmakers.
Nissan is in need of a partner to put it back on a stronger financial footing as it steps up restructuring efforts to cope with stalled revenue growth and lower profits. It faces pressure from an activist shareholder and a daunting debt load that has led to speculation in credit markets about its investment grade rating.
While its stock has jumped 25% this week on the back of the possible Honda merger news, it’s still down almost 20% this year.