Honda poised for best performance in 16 years after merger talks

• Published On: 24 December 2024 at 22:19

Honda's stock has risen following the announcement of a 1.1 trillion yen ($7 billion) share buyback and ongoing merger talks with Nissan.

The move is expected to yield the company's best performance in 16 years, reflecting strong investor confidence in its future prospects.

Nissan and Honda have confirmed that they have begun official merger talks, which could propel them to become the world's third-largest automaker by sales.

Honda has announced plans to buy back 24% of its issued shares by December 23 of next year.

If the gains hold, the stock will have risen 15.51%, its best day since October 2008. In contrast, Nissan stock fell more than 1%.

According to Honda CEO Toshihiro Mibe, the proposed Honda-Nissan merger will be focused on resource sharing, economies of scale, and synergies.

A holding company will be established as the parent organisation for both automakers and 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," said Hakan Dogu, chairman of Alagan Mobility Solutions.

"The new management has a big challenge to differentiate the product range and also extend the business," according to him.

Nissan's strategic partner, Mitsubishi, has been offered the opportunity to join the new group and is expected to decide by the end of January 2025.