Porsche has agreed to sell a 10% voting stake in its business to Qatar Holding, which will also take a 17% voting stake in the Volkswagen (VW) Group as it acquires share options held by Porsche in a deal worth EUR7bn (US$9.9 billion).
The complex deal with Qatar was one of the last remaining key parts of the merger, tentatively agreed last week.
VW will purchase 42% of Porsche for around EUR3.3bn by 2011, initiating a capital increase of EUR4bn in preference shares in the first half of next year to fund the purchase.
In addition, the controlling Piëch and Porsche families will sell Porsche Holding Salzburg, Europe’s largest dealership, to VW.
Porsche will establish research and development and testing facilities in Doha. In addition, Porsche and Qatar Holding have agreed to explore other areas of co-operation in the fields of research and development, technical service and support in the State of Qatar.
However, the appointment of VW Group CEO Martin Winterkorn and VW’s CFO Hans Dieter Poetsch to lead Porsche Automobil Holding SE, the holding group which controls both companies, raises questions about potential conflicts of interest and corporate governance.
“You can’t negotiate with yourself,” said Wolfgang Gerke, an honorary professor at the European Business School and member of the Frankfurt Stock Exchange’s exchange council, in a Reuters interview.
“The VW-Porsche case raises several corporate governance issues, including conflicts of interest,” Gerke said, adding that insufficient information was available to determine whether either company had suffered a disadvantage.
Analysts at Global Insight noted that it is just a few years ago that VW’s supervisory board was mired in controversy and scandal over bribery and corruption, resulting in sackings, convictions and imprisonment.
‘Transparency will be paramount to the new board and the obvious conflicts of Winterkorn and Poetsch should be decided on before the full merger,’ Global Insight said in a research note.
‘Qatar and the State of Lower Saxony will be key to ensuring that the supervisory board of VW maintains absolute clarity,’ the note added.