Nissan shares plunge after report says Honda merger talks off

Nissan shares plunged 4.8% on Wednesday after the Nikkei business daily said the carmaker had decided to withdraw from merger talks with rival Honda.

The newspaper and other Japanese media had reported that Honda had proposed making Nissan a subsidiary, instead of the previous plan to integrate under a new holding company.

The Japanese automakers have been in discussions for weeks on a combination that would effectively have resulted in an acquisition of Nissan, as Honda’s ¥7.3 trillion ($47 billion) valuation is nearly five times higher.

Representatives for Nissan and Honda had said they have not made any announcements about the state of the negotiations other than that they are ongoing ahead of the planned timing of mid-February for a deal framework.

The talks to create the world’s third-largest carmaker have gone haltingly since the plans were first announced in December. Honda and Nissan had pledged to put forward a framework for the transaction in late January, but recently pushed that back by several weeks.

Nissan is 36% owned by French carmaker Renault, which in late January sent representatives to Japan to express concern over the transaction and seek a premium for its stake, people familiar with the matter said.

Mitsubishi Motors, which has reportedly decided against joining the alliance, said earlier this week it would make a final decision once Honda and Nissan reach an agreement later this month.