It is not unusual for companies to form partnerships and if one ever gets into trouble, the other company can help them out of the trouble. At some point, after the trouble company is back on its feet, it will want to run its own affairs without the partner’s influence. The changing relationship means the controlling company has to both want to and have a desire to step back, if they do not then the relationship can go south or not work as expected. There was a good example in the news.
In an article by Maki Shiraki and Gilles Guillaume of Reuters, 2 decades ago, Nissan was in financial problems and needed help, Renault bailed them out and the Nissan people needed to receive approval from the Renault people to made decisions. It helped that Carlos Ghosn was the Chair of Renault and approved the deal. When Mr. Ghosn left Renault and operations changed at Nissan, the Nissan people wanted control back.
It took 4 months of intense talks but the relationship between Nissan and Renault will be changing as Renault will reduce its stake in Nissan to 15% from 43%. The 28% will go into a French trust which overtime will be sold.
Nissan and Renault will have a 15% cross share holding that will allow Nissan to exercise its voting rights which previously it was unable to do.
Nissan sells more vehicles than Renault, and the new agreement will allow Nissan to focus on the US, China and emerging markets.
Nissan and Renault have pledged to pool more resources into key projects in Latin Ameica, India and Europe involving marketing, vehicles and technologies.
Linking to dividend paying stocks, one of the reasons people like their banker is access to capital, one of the reasons people do not like their banker is limited access to capital. When people feel the company is in good shape they want to access capital according to their strategy not someone else calling the shots. There is a fine line to walk. With dividend paying stocks, these are ones with access to capital because they make profits and partnering with other companies is a good thing for it. Often times those with the gold make the rules, and those without gold need to agree until they receive their own gold. In addition, recently a shareholder voting card was received in the mail to vote for or against management – if you receive one exercise your vote.
There are more questions than answers, till the next time – to raising questions.