As expected, the European Court of Justice has today overturned the so-called ‘Volkswagen law’ that dates back to the 1960s and protects Volkswagen against hostile takeovers.
The court’s decision opens the door for a likely formal takeover by Porsche which has already amassed a 31% stake.
Immediately after the court announced its decision, Volkswagen’s share price rose.
The European Commission, which argued that the law was a barrier to cross-border investment in the European Union, saw the case as a chance to reinforce its stance against EU member-states that use strategic stakes in companies to block takeovers.
The Financial Times reported that a spokesman for the German justice ministry said the government “regretted that that court did not recognise (Berlin’s) arguments about protecting Germany as a business location” but added that the government would move quickly to rewrite the law in compliance with the court decision. “We will start the legislative process immediately in order to make the changes,” he said.
The law protecting Volkswagen was passed by Germany’s federal government in 1960, when the carmaker was turned into a partly privatised company. It prevents any shareholder from owning more than 20% of Volkswagen’s voting rights, regardless of how big their stake is.
The German state of Lower Saxony, where Volkswagen’s headquarters are located, continues to this day to hold a stake of about 20% in the company and said it would “retain its stake in VW” after the court’s decision.
Porsche said in a statement that it welcomed the ECJ ruling.
“With a voting interest of just above 30% in Volkswagen we obviously have a high interest in exercising our voting rights in full,” said Wendelin Wiedeking, CEO of Porsche in a first reaction to the ruling.
See also: GERMANY: VW law faces EU court defeat