RNO Renault SA

By Jason Chow and Stacy Meichtry 

PARIS--France is delaying plans to sell part of its stake in French car maker Renault SA as Volkswagen AG's emissions scandal and a fall in emerging-market demand pummels share prices across the auto industry.

APE, the state investment fund, was expected to sell a 4.73% stake in Renault back to the market this fall after carrying out a complex maneuver to expand its voting power at the car maker's annual shareholders' meeting in April.

A decline in Renault's share price is forcing the state to hold on to the shares, betting their value will rebound. On Thursday, APE announced it had begun to execute a series of options contracts designed to protect the state against potential losses.

With the options contracts maturing from October through December, APE decided to keep the shares rather than selling at an undisclosed strike price fixed in the contracts. Instead, APE will receive a payment from a counterparty bank to cover the difference between the strike price and the current market value of the shares.

The move saddles the state with Renault shares that have fallen 27% since their most recent May 22 high.

On Thursday, the fund reaffirmed its plans to eventually sell the stake without specifying a timeline. APE originally purchased the stake--increasing its ownership in Renault from 15% to 19.7%--to amass enough shares to acquire veto power for a key April 30 shareholder meeting.

Renault's management had called a vote on a resolution to exempt the company from a law that would have granted double-voting rights to the state and other long-term shareholders. The government successfully blocked that maneuver.

The move was controversial. Not only was the state meddling in the affairs of one of France's largest car makers, it was also threatening the balance between the car manufacturer and its Japanese alliance partner, Nissan Motor Co.

Renault owns a 43.4% stake in Nissan while the Japanese firm in turn owns a 15% stake in Renault. However, French cross-holding rules prevent Nissan from having a vote in Renault's affairs.

Economy minister Emmanuel Macron stated at the time that the expanded shareholding stake was a temporary measure to uphold the double-voting rights, and that he intended to sell down the stake following the vote.

Write to Jason Chow at jason.chow@wsj.com and Stacy Meichtry at stacy.meichtry@wsj.com

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(END) Dow Jones Newswires

October 08, 2015 12:43 ET (16:43 GMT)

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