Moody’s Approves Possible Honda-Nissan Merger

What you need to know

• Moody's gave a positive review of the potential merger of Honda and Nissan.
• Analyst Dean Enjo wrote that the deal would be "credit positive" if done correctly.
• Former Nissan CEO Carlos Ghosn warned Nissan would face "carnage" if the combination went through.

American depositary certificates (ADRs) for Honda (HMC), a Japanese competitor, advanced after Moody’s confirmed a positive outlook on the merger potential between Honda and Nissan.

Two companies announced yesterday their intention to merge forces, as costs are rising and the competition is increasing. This is especially true in the race for building cost-effective Electric Vehicles (EVs), with demand declining and Chinese rivals’ share of market expanding.

Moody's Says Combination Would Be 'Credit Positive'

Moody's said that the combination would be “credit positive if executed successfully." According to a report seen by Bloomberg and others, Dean Enjo, VP-senior analyst at Moody's, wrote that Nissan would be especially helped because it has weaker debt metrics than Honda.

Enjo added that the integration would be beneficial because the two automakers will be sharing research and development (R&D) costs.

However, former Nissan Chief Executive Officer (CEO) Carlos Ghosn warned that it would face cost-cutting “carnage,” because the two firms will have “total duplication.” He told CNBC that if the companies merge, “Honda is going to be in the driver’s seat,” and that Nissan would be “the minor partner.”

Even though Honda's ADRs have jumped the past two sessions on the news, they're still down about 13% year-to-date.

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