Renault–Nissan Alliance and Russian Technologies Create Joint Venture to Acquire a Majority Stake in AvtoVAZ

The Renault-Nissan Alliance, AvtoVAZ, Russian Technologies and Troika Dialog signed the non-binding agreement today in Paris. According to the memorandum, the Renault-Nissan Alliance and Russian Technologies will contribute their respective stakes in AvtoVAZ to a joint venture that will control Russia’s largest car maker AvtoVAZ.

Renault-Nissan plans to invest about US$750 million, which will give the French-Japanese car group 67.13% of the joint venture in mid 2014. The joint venture will then hold 74.5% of AvtoVAZ. The transaction is expected to be complete by 2014.

Renault, which purchased 25% of AvtoVAZ in 2008, will invest about US$300 million in the joint venture. Nissan, which does not currently own a stake in AvtoVAZ, will invest about US$450 million. Renault and Nissan will make periodic payments through 2014.

The joint venture will acquire Russian investment company Troika Dialog’s entire stake in AvtoVAZ by 2014.

Russian Technologies has agreed to restructure its outstanding loans with AvtoVAZ with approximately RUB7 billion (US$238 million) proceeds from the anticipated sale of AvtoVAZ’s non-core assets being used to repay part of Russian Technologies’ loans. The remainder of circa RUB46 billion (US$1.56 billion) of interest-free debt is being extended well beyond its current maturity date. This gives AvtoVAZ a strong balance sheet with no liquidity constraints.

The Renault-Nissan Alliance will perform financial, legal and environmental due diligence over the coming months. The parties expect to sign definitive agreements and close the transaction by the end of 2012, subject to customary regulatory approvals.