Porsche announced on Saturday (24 March), that it has decided to increase its stake in Volkswagen from 27.3 to 31%.


 


The maker of luxury sports cars and SUVs currently holds an option to purchase up to 3.7% of Volkswagen ordinary shares. This will take it over the 30% voting rights threshold and it will have to make a mandatory offer for Volkswagen.


 


However Porsche is not planning a full takeover at the moment. Porsche said that part of the background to the increase of the stake to over 30% is the expected fall of the so-called VW law which limits a shareholder obtaining more than 20% of voting rights in the company. By increasing its stake sooner, rather than later, Porsche wants to avoid a financial investor or hedge fund taking a significant stake in Volkswagen and gaining influence.


 


In a statement Porsche said that once it has made a mandatory offer, it will not have to make another offer, should it decide to increase its stake further at a later stage.


 


The state of Lower Saxony is Volkswagen’s second major shareholder, and it may decide to sell its shares if the VW law is repealed.


 


Experts expect that Porsche will eventually increase its stake to more than 75% to exclude the influence of another major shareholder, wrote the German press agency.


 


Porsche said that it will offer the minimum price prescribed by law as part of the mandatory offer. This is expected to amount to EUR100.92 per VW ordinary share. For the VW preference shares the price will be the minimum price which will be calculated by the federal agency for financial services supervision (BaFin).


 


Furthermore, the mandatory offer will not be conditional upon attainment of a minimum acceptance level (eg a majority interest in Volkswagen). Financing of the mandatory offer has been ensured via a credit facility arranged by ABN AMRO Bank, Barclays Capital, Merrill Lynch International, UBS and Commerzbank.


 


The Porsche board has, in this context, made it clear: Porsche will remain Porsche. Nothing will change with regard to the structure of the plants, the suppliers, the production and development partners, the dealers and the other partners. The existing business and legal relationships will remain unaffected by the transaction.


 


Management areas of responsibility will in future be divided between the holding activities on the one hand and the development, production and sale of premium sports vehicles on the other.


 


It is also proposed that the company, which will then be operating as a holding company, will be converted into a European stock corporation – ‘Societas Europaea’ (SE). An SE is a modern and internationally oriented corporate form which, enables the size of the supervisory board (12 members), which has proved its worth in the past, to be maintained for the future.

 


The operational company will continue to be based in Stuttgart, and the new holding company will also be located in the Stuttgart area. Various decisions including the conversion, domination and profit transfer agreement are to be taken at an extraordinary general meeting, which is expected to take place in June.


 


Porsche emphasised that it has traditionally had a close relationship with Volkswagen – the first ‘beetle’ was based on a development by the founder of Porsche.


 


Many joint projects, such as the 914, the 924 and the 944, and also a joint sales company operated between 1969 and 1974, were successful business decisions. Numerous Porsche developments are now standard in vehicles of the Wolfsburg-based group. The companies share the Cayenne and Touareg platform since adopted by Volkswagen subsidiary Audi for its Q7.


 


In the meantime, further joint projects have been initiated: a hybrid engine due on sale this decade, a joint electronics platform, cooperation to build the body shell for the new four-door Porsche Panamera, and further projects aimed at optimising fuel consumption and safety technology.


 


Porsche said that it is firmly convinced that a closer bond with VW through an increase of the stake to more than 30% of the Volkswagen ordinary shares will produce benefits for both partners without diluting or endangering the identity of Porsche.


 


The managing board of the sports car manufacturer said it regards the proposed increase of the stake in VW group as a logical step to enable it to meet the global challenges in the highly competitive automobile market even better. It is firmly convinced that the technical and strategic collaboration between Porsche and Volkswagen produces benefits for both partners.


 


This applies particulalrly in light of the pressure to rationalise and consolidate in the global automobile industry as a result of the increasing international competition, especially from the up-and-coming auto-making nations Japan, China (now the second largest autom producer in the world), India, Malaysia, Russia and others. Cooperations and alliances are not uncommon even today, but in the not-too-distant future they will be a part of everyday life, Porsche said.


 


Sue Brown