Impact: AvtoVAZ Shares Down almost 10 percent on delayed Renault-Nissan deal image

Renault and its Japanese subsidiary Nissan on Thursday said the alliance will will form a joint venture with Russian Technologies Corp. to become the largest shareholder in OAO AvtoVAZ (AVAZ), Russia’s biggest automaker.

Following the announcement, the shares of AvtoVAZ plunged almost 10 percent after investors discovered that a deal for the Renault-Nissan alliance to gain control of the company would not be put into effect for another two years.

The car group would hold 67 percent of a joint venture with state corporation Russian Technologies to own 74.5 percent of AvtoVAZ. The non-binding preliminary agreement would give the Franco-Japanese alliance 50.01 percent of the maker of the Lada. However, this will happen in 2014.

The joint venture will also acquire Troika Dialog’s entire stake of 25.64 % in AVTOVAZ by 2014.
Debt owed by Avtovaz will be restructured by Russian Technologies which will then receive money raised from the expected sale of non-strategic assets owned by Avtovaz.

Carlos Ghosn, who runs both Renault and Nissan, is looking to the maker of Lada brand vehicles to fuel growth in Russia, where the market may surpass Germany to become Europe’s biggest in 2014, according to the Russian Industry Ministry.

Car sales are expected to grow about 6 percent in Russia this year to 2.8 million vehicles and reach 4 million by 2015. This compares with a declining European market.