Honda stock climbs 14% amid merger talks with Nissan
The rise in shares of a car company
Honda Motor Co. Ltd. shares soared 13.55% in Tokyo trading on Tuesday, their biggest one-day gain since 2008.
It followed the carmaker's announcement of a massive share buyback plan and confirmation of merger talks with Nissan Motor Co. Ltd. The surge brought Honda's stock to 1,452 yen on the Tokyo exchange, while Nissan shares dipped slightly by 0.22% to 449 yen.
In U.S. markets, Honda’s American Depository Receipts rose 12.72% on Monday, closing at $26.93, with an additional 2.94% jump in after-hours trading, reports Benzinga.
Honda plans to repurchase up to 1.1 trillion yen ($7 billion) worth of shares by December 2025, representing approximately 24% of its outstanding stock. This significant move dwarfs its previous November plan for a 100 billion yen buyback, signaling a bold strategy to bolster investor confidence and financial stability as the company prepares for structural changes.
Merger Talks Progress Toward Global Ambitions
The two carmakers confirmed that formal negotiations are underway to merge operations, a move that could create the world’s third-largest carmaker by sales volume. The combined entity would challenge industry leaders like Toyota Motor Corp. and rising Chinese carmakers, such as BYD Co. and Geely Automobile Holdings Ltd.
Mitsubishi Motors Corp., which holds a 24.5% stake in Nissan, is also considering joining the alliance. A final decision from Mitsubishi is expected by January, while Honda and Nissan aim to conclude their merger discussions by June 2025.
Looking Ahead
The merger, coupled with Honda’s aggressive buyback plan, reflects a broader shift in strategy to combat industry challenges, including intensified global competition and economic uncertainties. Investors will closely monitor developments as the companies outline operational efficiencies and define leadership roles within the new entity.
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