Renault, Daimler share-swap talks stumble on valuation

Renault SA and Daimler AG have been unable to resolve differences over valuations as the carmakers explore a share swap that would bring Daimler into the Renault- Nissan alliance, two people familiar with the matter said.

Daimler and Renault, which said in December they were in talks about jointly developing small cars, have also been discussing an exchange of shares, said the people, who asked not to be identified because the negotiations are private.

Daimler is seeking a partner to improve profitability of its Mercedes A-Class and Smart cars by sharing development of vehicles and engines. The discussions are "more extensive and more advanced than realized," Sanford C. Bernstein analyst Max Warburton wrote in a report yesterday, citing "industry contacts." An equity tie-up would bring "financial and strategic security" to Renault, the London-based analyst wrote.

"I struggle to see the will on both sides" for Daimler and Renault to swap stakes, said Philippe Houchois, an analyst at UBS AG in London who has "buy" ratings on Renault and Daimler shares. "There isn't much scope for the companies to cooperate beyond small cars."

Florian Martens, a Daimler spokesman, declined to comment on any share-swap negotiations with Renault. The Stuttgart, Germany-based company is discussing joint production of small cars with carmakers including Renault, he said, reiterating comments by Daimler Chief Executive Officer Dieter Zetsche.

Valuation Gap

Simon Sproule, a spokesman for Renault-Nissan, said he had "nothing to add" to remarks by CEO Carlos Ghosn, who said March 3 that there was no "particular prospect" of an equity tie-up for the alliance.

Renault, based in Boulogne-Billancourt outside Paris, fell 33 cents, or 1 percent, to 33.57 euros in the French capital yesterday, valuing the company at 9.6 billion euros ($13.1 billion). Daimler declined 21 cents, or 0.6 percent, to 33.33 euros on the Frankfurt exchange, giving the automaker a market valuation of 35.4 billion euros.

Daimler traded on average at about 17 times its reported earnings in 2009, while Renault traded at 11 times its reported earnings in the same period, Bloomberg data shows.