Nissan calls off potential $1 billion sale of battery unit to China's GSR

Nissan Motor canceled a potential $1 billion sale of its electric car battery unit to China's GSR Capital, and while the automaker said it still aimed to find a buyer, analysts feel it could be a hard sell as the technology was not cutting edge.

Japan's second-biggest automaker said on Monday the Chinese investment firm lacked the funds to make the purchase. The deal could not be closed by the June 29 deadline, Nissan said, ending a process which had faced several delays since its announcement almost a year ago.

GSR, which earlier this year committed to spending hundreds of millions of dollars in electric car battery ventures in places such as Sweden and Turkey, declined to comment.

As tightening global emissions regulations send global automakers scrambling to develop and mass produce electric cars, battery companies and auto parts makers are seeking to expand production of lithium ion batteries, a key component of these vehicles. Investors have been buying into the battery industry.

In August, Nissan had announced its plan to sell Automotive Energy Supply Corp (AESC), which includes battery plants in the United States, England and Japan, to GSR for an undisclosed sum. A source told Reuters at the time that the Chinese firm had agreed to pay Nissan a total of $1 billion for the deal.

The Japanese automaker has been wanting to sell AESC as it looks beyond its unit to procure low-cost, high performing lithium batteries. Its automaking partner Renault SA sources EV batteries from South Korea's LG Chem.

But the deal with the Chinese company faced a series of delays, including prolonged talks between GSR Capital and NEC Corp, which holds a 42 percent stake in the company, over the acquisition of its subsidiary NEC Energy Devices, which holds a 7 percent stake.

Nissan, which holds a 51 percent stake in AESC, had extended the transaction deadline three times from its original December 2017 closing date.

A spokesman of the automaker said the company still intends to sell the subsidiary, but declined to comment on whether GSR could still be a prospective buyer.

PANASONIC NOT KEEN

Previously, Japan's Panasonic Corp was among the companies which had been in talks with Nissan over a sale of the batteries unit, sources have told Reuters. Along with LG Chem, Samsung Electronics, and China's CATL, Panasonic is a key supplier of electric car batteries, producing them for Tesla.

But Yoshio Ito, head of Panasonic's automotive business, told reporters at a roundtable in Osaka on Monday that the potential to benefit from buying another maker's existing equipment and facilities was very limited. "At the moment we're not interested in acquiring an existing battery maker."

Some analysts said that finding other investor-buyers for AESC could be difficult given that its lithium manganese oxide-based battery technology, while stable and low cost, delivers lower performance than some other technologies.

Panasonic uses a chemical composition based on nickel, cobalt and aluminum in its lithium batteries which are used in Tesla vehicles, while LG Chem's batteries are based on a lithium nickel cobalt manganese oxide chemistry.

"AESC hasn't been able to increase the performance of its batteries to the level it was hoping for," said Yasuo Imanaka, chief analyst at Rakuten Securities.

"Unless you have a technology which stands out, it could get more difficult to find an investor in an operation like this."

GSR, which has previously invested in clean technology and electric cars, mainly targets foreign industrial and emerging technology companies, including electric car batteries and pharmaceuticals firms.

Recently GSR has ramped up its dealmaking in Europe, agreeing in March to invest $500 million in Swedish electric car maker National Electric Vehicle Sweden and produce EV batteries in the country, and signing a deal to set up a $4.5 billion joint venture with Turkey's Zorlu Holding to build a battery assembly plant in Turkey.

Reporting by Chris Gallagher, Chang-Ran Kim and Thomas Wilson; Additional reporting by Makiko Yamazaki and Maki Shiraki.