Honda’s shares soared after the company said it was in talks to merge with rival automaker Nissan.
Honda shares rose as much as 17% when local markets opened on Tuesday, a day after it announced the start of talks with Nissan. The company’s shares closed up 12% on Tuesday.
In addition to merger talks, Honda announced Monday that it would buy back up to 1. 1 trillion yen, or about $7 billion, of its shares through December 2025.
Mitsubishi Motors, whose representatives were also present at Monday’s announcement, said it may join the merger. Nissan is Mitsubishi’s largest shareholder.
“Nissan and Honda will begin discussions from today with the aim of clarifying the option of a business integration towards the end of January, in line with the Mitsubishi Motors review,” Honda CEO Toshihiro Mibe said in a statement on Monday.
Honda did not respond to Business Insider’s request for comment.
Honda shares first fell when news of the merger talks broke last week. The company’s shares closed down 3% when local markets closed on Wednesday.
The merger with Honda would be a key lifeline for Nissan, which is suffering from declining sales this year.
In November, Nissan said it was slashing 9,000 jobs globally to reduce costs.
Nissan’s inventory is down about 19% this year, while Honda’s is down about 15% year-to-date through Monday’s close.
Although Honda and Nissan have presented the deal as a merger, the transaction would see Honda play a leading role in the entity.
In addition to the appointment of the president of the new holding company, Honda will appoint the majority of the members of its board of directors.
“It’s a bailout,” Mibe told reporters on Monday.
A prerequisite for the merger is for Nissan to complete its business turnaround, Mibe added.
Honda and Nissan are the second and third largest Japanese automakers, respectively.
If completed, the merger would create the world’s third-largest automaker by volume. It would also be the largest national merger in Japan’s history.
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