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(Bloomberg) -- Nissan Motor Co. has become the latest buyout target in Japan, as it explores a merger with Honda Motor Co. and faces a overture from Hon Hai Precision Industry Co., the Taiwan-based manufacturer of iPhones known as Foxconn.
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Shares in Nissan jumped 24% on Wednesday, the most on record to hit the daily limit, after the two Japanese carmakers acknowledged that talks are ongoing to better position themselves for competitive challenges during a time of upheaval in the global auto industry.
Foxconn, which has been investing heavily in factories to build electric vehicles, has also approached Nissan to take a controlling stake, a person with knowledge of the matter said.
It’s unclear if Nissan has entered talks with Foxconn or already rebuffed its overture, and the position of Renault SA — Nissan’s largest shareholder with a 36% stake — is also uncertain. Yet the flurry of activity around Nissan reflects a charged corporate environment in which Japan’s biggest companies are vulnerable to takeover like never before.
Honda is considering several options that may also involve a capital tie-up or the establishment of a holding company, Executive Vice President Shinji Aoyama said on Wednesday. One option being considered is the creation of a new holding company under which the combined businesses would operate, a person familiar with the talks said. The transaction could also be expanded to include Mitsubishi Motors Corp., which already has capital ties with Nissan, the person said.
An announcement by Honda and Nissan could happen as soon as on Dec. 23, TBS reported Wednesday. They plan to sign a memorandum of understanding to discuss shared equity stakes in a new holding company, the Nikkei reported earlier. Stock in Honda fell as much as 3.4%.
A spokesperson for Nissan declined to comment. A representative for Foxconn wasn’t immediately available for comment.
Too Many Japanese Carmakers
The Nikkei suggested that Foxconn’s interest in Nissan accelerated the Honda-merger effort out of fears that the Japanese company may be vulnerable to a takeover by the Taiwanese firm.
A similar dynamic is playing out with one of Japan’s biggest consumer brands, Seven & i Holdings Co., whose founding family is leading a consortium to take the company private in order to fend off a buyout proposal from Canada’s Alimentation Couche-Tard Inc.
A merger between Honda and Nissan would effectively consolidate the Japanese auto industry into two main camps: One controlled by Honda, Nissan and Mitsubishi and another consisting of Toyota Motor Corp. group of companies.