Renault-Nissan and
state corporation Russian Technologies will form joint venture to
accelerate product launches and technology transfer to AVTOVAZ,
Russia’s largest carmaker.
Renault-Nissan
will invest about US$750 million, and Russian Technologies will
favorably restructure debt as they form a joint venture.
Renault-Nissan
will get a majority stake in the joint venture, which will control
AVTOVAZ; transaction is expected to be complete in 2014.
PARIS - The
Renault-Nissan Alliance and state corporation Russian Technologies have
agreed to create a joint venture and give the Renault-Nissan Alliance an
indirect majority stake in AVTOVAZ, according to a memorandum of
understanding.
The Renault-Nissan
Alliance, AVTOVAZ, Russian Technologies and Troika Dialog signed the
non-binding agreement today in Paris. According to the memorandum, the
Renault-Nissan Alliance and Russian Technologies will contribute their
respective stakes in AVTOVAZ to a joint venture that will control
AVTOVAZ, Russia’s largest car company and maker of the iconic Lada
brand.
Renault-Nissan plans
to invest about US$750 million, which will give the French-Japanese car
group 67.13% of the joint venture in mid 2014. The joint venture will
then hold 74.5% of AVTOVAZ. The transaction is expected to be complete
by 2014.
Renault, which
purchased 25% of AVTOVAZ in 2008 and then helped AVTOVAZ pilot an
aggressive turnaround, will invest about US$300 million in the joint
venture. Nissan, which does not currently own a stake in AVTOVAZ, will
invest about US$450 million. Renault and Nissan will make periodic
payments through 2014.
Russian Technologies
has agreed to restructure its outstanding loans with AVTOVAZ with
approximately RUB7 billion (US$238 million) proceeds from the
anticipated sale of AVTOVAZ’s non-core assets being used to repay part
of Russian Technologies’ loans. The remainder of circa RUB46 billion
(US$1.56 billion) of interest-free debt is being extended well beyond
its current maturity date. This gives AVTOVAZ a strong balance sheet
with no liquidity constraints.
The Renault-Nissan
Alliance will perform financial, legal and environmental due diligence
over the coming months. The parties expect to sign definitive agreements
and close the transaction by the end of 2012, subject to customary
regulatory approvals.
The joint venture will
acquire Russian investment company Troika Dialog’s entire stake in
AVTOVAZ by 2014.
Ruben Vardanian, President of Troika
Dialog, said “Troika
Dialog is proud to have played an active role in fostering one of the
most successful strategic turnarounds in Russia's industrial sector.
AVTOVAZ is a compelling example of how a company can benefit from the
collective efforts of some of the leading names in the industry globally
to provide a model for future competitiveness and underline the
automobile industry’s contribution as a thriving sector to the Russian
economy.”
Collaboration remains on fast track
The memorandum comes a
month after Russian Prime Minister Vladimir Putin inaugurated a US$525
million assembly complex in AVTOVAZ’s Togliatti factory, adding capacity
of up to 350,000 cars per year. With the new facilities, the factory
has a capacity of almost 1 million cars per year.
Renault, Nissan and
Lada are launching a product offensive that will update all core Lada
models and launch new cars across the three brands – including five
models from the newly inaugurated facility. In addition to Togliatti,
the three brands operate plants in Moscow, St. Petersburg and Izhevsk.
“AVTOVAZ
welcomes this agreement between our core shareholders. The company
believes the Renault-Nissan Alliance and Russian Technologies shared
vision for AVTOVAZ is a key enabler of our future success,”
said AVTOVAZ CEO Igor Komarov. “Both
core shareholders will continue to bring the support the company needs
as it undergoes its biggest transformation plan ever. The AVTOVAZ
management team and our partners within the Alliance will continue to
accelerate our integration and joint projects.”
Russia is the fastest
growing economy in Europe and should remain in the forefront for several
decades, thanks to the surge in upper- and middle-class consumers. More
than 10 million Russian households already earn more than US$50,000 per
year.
Total industry volume
in Russia last year was 2.65 million vehicles, including light
commercial vehicles. Volume in 2012 is expected to be 2.9 million units.
The Alliance sold
878,990 cars in Russia last year – including 578,387 Ladas. With a
market share of nearly 33 percent, Russia is the Alliance’s third
largest market after China and the United States.
HSBC is an advisor to
Renault-Nissan in this transaction.
