AvtoVAZ Shares Plunge 10% on Delayed Renault-Nissan Deal

The shares of Russia’s leading auto maker AvtoVAZ plunged almost 10 percent on Thursday after investors discovered that a deal for the Renault-Nissan alliance to gain control of the company would not be put into effect for another two years.

Before that, AvtoVAZ’s ordinary shares rose by more than three percent to 23 rubles per share after news that the auto consortium Renault-Nissan and Russian Technologies government corporation had agreed to form a joint venture to buy a majority stake in AvtoVAZ.

“Renault-Nissan plans to invest about $750 million [in the project] and that will give [the alliance] a 67.13 percent stake in the joint venture by mid-2014. The joint venture will hold 74.5 percent of AvtoVAZ. The deal is scheduled to be closed in 2014,” Renault Russia said in a statement.

By 2 p.m. Moscow time (10:00 a.m. GMT) however, AvtoVAZ’s ordinary stock trading on the MICEX-RTS stock exchange had fallen by 8.6 percent to 20.4 rubles ($0.69) per share, while preferred stock had plunged by 10.8 percent to 7.5 rubles compared with the 0.1 percent fall in the MICEX index at that time,.

Investors overreacted to the deal and were disappointed when they learned the transaction would be carried through only in 2014, said Grandis Capital asset manager Andrei Tolstousov.

“It was earlier expected that Renault-Nissan would implement this plan in 2012 or 2013. After that, investors expected a share buyout offer from Renault-Nissan because the alliance would gain control of AvtoVAZ,” he said.

“But what is the sense of holding shares for this repurchase for another two years?” he said, adding the Russian auto giant’s stock was hardly liquid.

Leave a comment