Honda shares rise 17% as buyback eases concerns over Nissan deal

(Bloomberg) — Shares of Honda Motor Co. rose more than 17%, the most since August, after the automaker said it would sell up to 1.1 trillion yen ($7 billion) in shares by next December ) before a deal of this size is concluded for a takeover of the ailing competitor Nissan Motor Co.

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Honda said in a news release Monday that it will buy back a maximum of 24% of outstanding shares between Jan. 6 and Dec. 23 next year. The two automakers announced that day a tentative agreement to form a joint holding company, with shares scheduled to go public in August 2026.

The buyback is seen as an attempt to allay Honda shareholders’ concerns about the negative impact of working with Nissan on the company. Honda was the best-performing company on the Nikkei 225 as of 11 a.m. in Tokyo and was the biggest contributor to gains on the benchmark Topix index.

“The massive share buyback plan shows that Honda is trying to sweeten the pill for shareholders by merging with Nissan,” wrote Julie Boote, an analyst at Britain’s Pelham Smithers, in a report. Shares of Honda fell 3% after the possible collaboration came to light on December 18 amid fears it would have to bail out Nissan.

The share buyback “is a sign that Honda is very focused on improving its capital structure and stock price,” said Tatsuo Yoshida, senior analyst at Bloomberg Intelligence. The size of the buyback plan was a surprise, he added.

By buying back such a large portion of stock, Honda could be trying to influence the ratio of its eventual deal with Nissan, since the automakers have agreed to base that ratio in part on their respective stock prices, wrote Travis Lundy, an analyst at Quiddity Advisors. in a note to SmartKarma.

“This highlights the clearly advantageous position Honda is in,” Lundy added.

However, the positive impact of Monday’s buyback announcement is likely to be short-lived as the risks a Nissan deal poses to Honda become clear, said Seiji Sugiura, senior analyst at Tokai Tokyo Intelligence Laboratory.

“I don’t know why Honda decided to do this now before Nissan announced the details of its restructuring plan,” Sugiura said. “When you think about what Honda has to deal with, it’s a bit worrying.”

Shares of Nissan fell as much as 7% in early trading on Tuesday but were little changed as of 11:30 a.m. The drawn-out Honda deal plan could be interpreted as a delay in a necessary restructuring of Nissan’s management, Sugiura said.

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