Honda’s announcement of a 1.1 trillion yen ($7 billion) share buyback, along with ongoing merger discussions with Nissan, has led to a surge in its stock.
The move is on track to deliver the company’s best performance in 16 years, reflecting strong investor confidence in its future prospects.
Nissan and Honda have confirmed they’ve started official merger negotiations, a move that could propel them to become the world’s third-largest automaker by sales.
Honda announced plans to buy back 24% of its issued shares by December 23 next year.
Its stock rose 15.51%, marking its best day since October 2008, if the gains hold. In contrast, Nissan shares dropped over 1%.
The proposed Honda-Nissan merger will focus on sharing resources, achieving economies of scale, and creating synergies, according to Honda CEO Toshihiro Mibe.
A holding company will be formed as the parent organization for both automakers and listed on the Tokyo Stock Exchange.
“These two companies, they are operating in the same market, and they have very similar brand images, they have very similar products,” Hakan Dogu, chairman of Alagan Mobility Solutions, said on Tuesday.
“The new management has a big challenge to differentiate the product range and also extend the business,” he added.
Nissan’s strategic partner, Mitsubishi, has been offered the chance to join the new group and is expected to make a decision by the end of January 2025.
