Honda Left Nissan at the Altar… Now a Private Equity Shark Smells Blood

Have you ever been on the verge of making a horrible decision, only to snap out of it at the last second and avoid disaster? (I’m sure a specific scenario just popped into your mind when you read that). Well, that’s basically what Honda just did with Nissan.

After months of back-and-forth, the two Japanese automakers finally called off their $50 billion merger, citing "decision-making speed" and the "increasingly volatile" car market as reasons. I’m guessing Honda took one last look at Nissan’s balance sheet and realized they didn’t want to tank their reputation by merging with a company that’ll finance a car for anyone with a pulse.

On paper, a Nissan-Honda super-merger would have created the third-largest automaker in the world. In reality, there’s a 99% chance it would’ve just hurt Honda’s reputation. Thankfully, Honda, which actually has customers willing to pay full price for its cars, saw the writing on the wall and got out while it could (which caused their stock to jump 2% in price from the news).

Now that Honda’s walked, Nissan is out here on the rebound, desperate for a new partner. That’s where KKR & Co. comes in, the private equity firm best known for its love of distressed assets and ambitious turnaround plays.

KKR is reportedly considering an investment in Nissan (either through equity or debt) to "improve Nissan’s financial position."

This wouldn’t be KKR’s first questionable move in Japan’s struggling auto sector. They previously sunk $2 billion into Marelli Holdings Co., an auto-parts supplier, only to watch the investment go up in flames when Marelli needed a massive restructuring in 2022. And if that wasn’t enough, KKR is currently busy fighting off Bain Capital in a bidding war over Fuji Soft Inc., while also sniffing around a potential deal involving Japan’s biggest convenience store chain, Seven & i Holdings. Clearly, they enjoy chaos.

Unfortunately for KKR, they aren’t the only player interested. Foxconn (yes, the same Foxconn that assembles iPhones… although they just lost their huge contract with Apple) is also considering making a move. Their chairman, Young Liu, has hinted at buying Renault’s 36% stake in Nissan, possibly turning the automaker into an EV and software partner.

(Source: CNN)

For Honda, walking away from this deal was obviously the best decision (I’m surprised they were ever serious about this in the first place). Nissan, on the other hand, is playing a dangerous game. Their lineup is outdated, they’re discounting cars to try to entice nervous buyers and now they’re hoping private equity can fix their mess. Not a good place to be.

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Stock.News has positions in Apple.