Article via Bloomberg, Photos via porschepedia.com and themotorreport.com:
Volkswagen to Pay 3.3 Billion Euros for Porsche Stake (Update1)
Chad Thomas and Cornelius Aug. 13 (Bloomberg) — Volkswagen AG, Europe’s largest carmaker, will pay about 3.3 billion euros ($4.7 billion) for a 42 percent stake in Porsche SE’s automotive unit as it executes a gradual merger of the two manufacturers.
Volkswagen will fully integrate the maker of the 911 sports car in 2011 as long as all merger requirements are met, the companies said today in separate statements. Volkswagen plans to issue new preferred shares in the first half of next year to help pay for the purchase, which values Stuttgart, Germany-based Porsche’s car division at 12.4 billion euros.
Volkswagen Chief Executive Officer Martin Winterkorn said today that the merged carmaker’s operating profit will increase by 700 million euros annually. Winterkorn will be CEO of the Porsche SE holding company as of Sept. 15 and VW’s chief financial officer, Hans Dieter Poetsch, will take the same role at the company.
“This merger implies huge synergies,” Stefan Bratzel, head of the Center for Automotive Research Institute in Bergisch-Gladbach, Germany, said before the announcement. “Together, Volkswagen and Porsche can carve up the world’s car markets.”
The manufacturers announced plans in July for a transaction that would include a state-owned Qatari investment fund buying 17 percent of Wolfsburg, Germany-based Volkswagen and a possible holding in Porsche. Winterkorn said today that Qatar will be a “strong partner” for VW.
Beating Toyota
Executives have said the combined company will eventually overtake Toyota Motor Corp., the world’s biggest automaker, in sales and profitability. Winterkorn set a target in early 2008 of beating Toyota in sales and profit margins as the Toyota City, Japan-based competitor was poised to overtake General Motors Co. as the industry’s biggest carmaker by deliveries.
Winterkorn said the combined carmaker will have sales of 6.4 million vehicles and more than 400,000 employees. Porsche will become the 10th brand in the Volkswagen stable and will continue to have all of its production sites, Winterkorn said. Volkswagen brands include the Audi luxury division and the cheaper Seat and Skoda marques.
“As a group with now 10 strong, independent brands, we will further expand our unique global position,” Winterkorn said in a statement. “We now have what it takes to become the automotive industry’s No. 1.”
Management Changes
Porsche CEO Wendelin Wiedeking and CFO Holger Haerter stepped down on July 23 and the company named Michael Macht, its personnel chief, to succeed Wiedeking as the head of the automotive business, called Porsche AG, which will remain based in Stuttgart. Macht will represent the Porsche brand at Volkswagen as the companies combine, Porsche said today.
The founding Porsche and Piech families will remain the largest VW shareholders and the German state of Lower Saxony will be the second-biggest investor, VW said today.
The family owners will sell an automotive trading company in Austria to Volkswagen as part of the deal. Porsche Holding Salzburg has an enterprise value of 3.55 billion euros and sells 474,000 vehicles a year, Volkswagen said. The trading business will be sold starting in 2011.
Proceeds from the sale of the Austrian business will be used to improve Porsche’s financial condition through the issuance of common shares, the company said. Porsche also plans to sell new preferred shares.
Debt Spiral
The planned combination ends a four-year feud for control that led to Porsche amassing at least 10 billion euros in debt as it accumulated 51 percent of Volkswagen’s stock in a failed takeover attempt.
Wiedeking left a job he had held for 16 years after his company’s board committed to selling the automotive operations to VW and seeking as much as 5 billion euros in capital, with Qatar as a possible investor. The Persian Gulf state would be the first shareholder outside the Porsche and Piech families to hold voting rights in the 78-year-old company’s history.
Porsche’s target stake in Volkswagen was 75 percent, a holding that could have given it access to VW’s cash. The sports-car maker held options for 20 percent of Volkswagen’s stock as part of the takeover effort.
Porsche is in “advanced” talks to sell most of the options it holds in VW to Qatar, which will result in the emirate becoming VW’s third-largest shareholder, Volkswagen said today. Porsche said on July 29 that it aimed to sell options to Qatar and that writedowns on the derivatives would cause a pretax loss of as much as 5 billion euros for the year ended July 31.
Lower Saxony will receive two seats on the VW supervisory board and will continue to hold a blocking minority on key decisions, VW said.
To contact the reporters on this story: Chad Thomas in Helsinki at cthomas16@bloomberg.net; Cornelius Rahn in Wolfsburg, Germany, via crahn2@bloomberg.net.
Last Updated: August 13, 2009 15:34 EDT
