Russian Technologies, the state weapons manufacturer, has agreed to sell its majority holding in AvtoVAZ to the Renault-Nissan Alliance.

The alliance, AvtoVAZ, Russian Technologies and Troika Dialog have signed a non-binding agreement, ending many months of speculation over the future of the Lada car maker. According to this memorandum, the alliance and Russian Technologies will contribute their respective stakes in AvtoVAZ to a joint venture with this new JV in turn controlling AvtoVAZ.

Renault-Nissan is due to own 67.13% of the new JV in mid 2014, following an investment of US$750m. This JV will then hold 74.5% of AvtoVAZ. The transaction is expected to be complete by 2014.

Renault purchased 25% of AvtoVAZ in 2008, these funds being used to restructure the company. Its new investment will be close to  $300m, with Nissan contributing an additional $450m. Renault and Nissan say they will make ongoing, periodic payments until 2014 while the joint venture will acquire Russian investment company Troika Dialog's entire stake in AvtoVAZ by 2014.

As part of the May 2012 announcement, Russian Technologies, the state-controlled weapons manufacturer which is also the largest shareholder in AvtoVAZ, agreed to restructure its outstanding loans with the carmaker. Approximately RUB7bn ($238m) proceeds from the anticipated sale of AvtoVAZ's non-core assets will be used to repay part of Russian Technologies' loans.

The alliance further stated it would perform financial, legal and environmental due diligence over the coming months. The parties expect to sign definitive agreements and close the transaction by the end of 2012, subject to customary regulatory approvals.