Porsche AG is to acquire approximately 20% of the share capital of Volkswagen AG.
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In a statement, the Stuttgart-based sportscar specialist said it was doing so “because Volkswagen is now not only an important development partner for Porsche, but also a significant supplier for approximately 30% of Porsche’s sales volume.
“Making this investment, we seek to secure our business relations with Volkswagen and make a significant contribution to our own future plans on a lasting, long-term basis.”
Porsche will finance the acquisition of the planned slice of Volkswagen from its own funds.
“The share assumed will not under any circumstances reach the threshold at which Porsche would be required to submit a public bid for the takeover of Volkswagen,” the statement noted.
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By GlobalData“The planned acquisition is to ensure that, following the anticipated abrogation of the VW Act under an appropriate judgment handed down by the European Court of Justice, there will not be a hostile takeover of Volkswagen by investors not committed to Volkswagen’s long-term interests. The European Court of Justice is expected to hand down such a judgment latest in spring 2007.
“Our planned investment is the strategic answer to this risk. We wish in this way to ensure the independence of the Volkswagen Group in our own interest. This “German solution” we are seeking is an essential prerequisite for stable development of the Volkswagen Group and, accordingly, for continuing our cooperation in the interest of both companies.”
Marketwatch.com said the Porsche move would make it the largest shareholder in Wolfsburg-based Volkswagen and make it more difficult for a hostile takeover of Europe’s largest automaker by unit sales.
Volkswagen supplies Porsche with key components, including the body structure for the Cayenne, one of Porsche’s most important models, the report noted.
“(Porsche) can’t take the risk of a takeover, they have to do it,” Malte Schaumann, an analyst at SES Research, told Marketwatch.com, which added that the move was taken poorly by Porsche shareholders, who had expected a share buyback or dividend increase from the luxury automaker. Porsche also was criticised for buying VW now, rather than during the first half of the year.Porsche shares dropped over 10% in early trade, Marketwatch noted.
“What becomes painfully obvious is that investors in Porsche have no say in strategy,” Stephan Droxner, an analyst at German bank LBBW, told the website, while Deutsche Bank downgraded Porsche shares to ‘sell’ following the news.
Marketwatch noted that Volkswagen’s shares have soared recently on rumors that an investor, notably Carl Icahn, was building a big stake. Porsche reportedly said it’s already acquired a stake of less than 5% already in VW.
Marketwatch also noted that the ties between Porsche and Volkswagen go back more than a half-century. Ferdinand Porsche was a designer of Volkswagen’s original Beetle amd his descendants own more than half of Porsche’s stock and voting shares.
Meanhile, Porsche’s grandson, Ferdinand Piech, is a former Volkswagen CEO, heads Volkswagen’s supervisory board and sits on Porsche’s supervisory board, the website added.
Marketwatch.com said it’s still not clear how much Porsche will pay for the stake – most analysts are expecting Porsche to buy the 41 million shares held in VW’s treasury, rather than make another open-market buy.
Jochen Gehrke, an analyst at Kepler Equities, told Marketwatch.com the move, combined with Friday’s decision to sell Europcar International, will fund VW’s restructuring plan if Porsche acquires Volkswagen’s treasury shares.
“It should give (VW) €3 billion in cash they can put into restructuring,” he reportedly said.
