MUFG Mitsubishi UFJ Financial Group Inc

TOKYO—Nissan Motor Co. is considering buying about a one-third stake in Mitsubishi Motors Corp. for about 200 billion yen ($1.8 billion) to become the latter company's single largest shareholder, a person familiar with the matter said Thursday.

The move by Nissan, which is already in a vehicle-development and manufacturing partnership with Mitsubishi, could lead to a realignment of the Japanese auto industry, with eight car makers currently.

It comes as Mitsubishi grapples with declining sales and growing costs after admitting in April to overstating fuel economy for certain models sold in Japan.

The current partnership between Nissan, Japan's second-biggest auto maker based on global vehicle sales volume, and Mitsubishi, Japan's sixth largest, doesn't involve any capital.

In separate statements Thursday, the two companies said they would discuss a capital alliance at respective board meetings to be held later in the day. Nothing has been decided as of now, they said.

If they reach a decision at the board meetings, the two companies could hold a news conference to announce the deal later Thursday, the person familiar with the matter said.

Nissan Chief Executive Officer Carlos Ghosn is set to brief the media later today on the car maker's earnings results for the fiscal year that ended in March.

Mitsubishi Motors shares were bid-only, while Nissan shares fell 2.4% in early morning trade.

The deal news was reported earlier Thursday by public broadcaster NHK and other Japanese media.

Currently, Mitsubishi Motors's biggest single shareholder is Mitsubishi Heavy Industries Ltd., which holds about a 20% stake in the auto maker. Mitsubishi Corp. holds a 10% stake, while the Bank of Tokyo-Mitsubishi UFJ, owned by Mitsubishi UFJ Financial Group Inc., holds about a 4% stake.

These Mitsubishi group companies rescued Mitsubishi Motors in 2004 by purchasing preferred shares after the car maker's partnership with DaimlerChrysler fell apart. About two years ago, the auto maker paid back the group companies, but three of the group companies retained a combined 34% stake.

Under Japanese law, shareholders with a stake of more than a third carry veto power of major management decisions.

Nissan's main partner is Renault SA, which owns a 43% voting interest in the Japanese company. The Japanese auto maker owns a 15% nonvoting right in the French car maker.

Under the Nissan-Mitsubishi partnership, Mitsubishi has developed and produced several minicars with 0.66 liter engine displacements for the Japanese market. Those vehicles were sold under the Mitsubishi and Nissan brands, but sales have been halted since late April due to the fuel-economy problems with these cars.

Mitsubishi has a strong foothold in Southeast Asia, while its presence in the U.S. is relatively thin. One of Nissan's biggest markets is the U.S. and the company has been trying to expand in Southeast Asia for years.

Mitsubishi Chairman Osamu Masuko said on Wednesday in a news conference that his company wants to continue working with Nissan. He also said the company has enough cash at the moment to manage costs associated with the fuel-economy problem.

Write to Yoko Kubota at yoko.kubota@wsj.com

(END) Dow Jones Newswires

May 11, 2016 21:15 ET (01:15 GMT)

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