Renault-Nissan to Take Control of Russia’s AvtoVAZ

Renault-Nissan has finalized the creation of a joint venture with Russian Technologies State Corp. that will give the French-Japanese alliance a controlling interest in Russia's largest automaker OAO AvtoVAZ.

That control will allow Renault-Nissan to pool the results of the maker of Lada cars with its own. The three automakers share four assembly plants in Russia that are expected to reach combined annual capacity of at least 1.7 million cars in 2016.

The trio aim to hike their share of Russia's auto market to 40% by 2016 from a combined 30.5% this year. Renault-Nissan plans to use its technology and product expertise to upgrade the Lada brand, which is known for low-quality, clunky and outdated models.

Renault bought a 25% stake in AvtoVAZ for €700 million in 2008. Its alliance with Nissan will pay 23 billion rubles (€578 million) to buy the entire 25% holding of Russian investment firm Troika Dialog over the next two years. Russian Technologies already owns 24.5% of the carmaker.

Renault-Nissan and Russian Technologies will pool their combined 74.5% of AvtoVAZ equity in the new venture, in which they will hold stakes of 67.1% and 32.9%, respectively. (Renault will own 50.1% and Nissan 17%.)

Renault-Nissan CEO Carlos Ghosn will be chairman of the venture, called Alliance Rostec Auto BV. The venture's board will be composed of three additional representatives of Renault-Nissan and two from Russian Technologies.

Renault-Nissan also will control the majority of AvtoVAZ's 15-member board. Russian Technologies CEO Sergey Chemezov remains AvtoVAZ chairman but will begin alternating in that post with Ghosn next June.

As part of the deal, Russian Technologies is restructuring its 54 billion rubles (€1.4 billion) of loans to AvtoVAZ. The carmaker plans to sell its non-core assets to raise an estimated 8 billion rubles (€200 million) that will be used to repay part of that debt. Russian Technologies will extend the remaining loans interest-free until 2032.