VW-Porsche Merger Almost Complete – Car Pro News

Europe’s largest carmaker, Volkswagen AG, plans to complete its merger with legendary sports car manufacturer Porsche this month in a deal that puts the founding Porsche family in control of both companies.
The merger, expected to be completed by Aug. 1, concludes a drawn-out takeover fight that began five years ago when tiny Porsche set its sights on VW.
After many twists and turns, Ferdinand Piëch, the supervisory board chairman of VW and a grandson of Ferdinand Porsche, came away the winner. Porsche is joining VW’s large stable of mass-market as well as illustrious brands, including Audi and Lamborghini.
“The unique Porsche brand will now become an integral part of the Volkswagen Group,” said VW Chief Executive Martin Winterkorn. “That is good for Volkswagen, good for Porsche and good for Germany as an industrial location.”
Wolfsburg-based Volkswagen, one of the world’s three biggest automakers, will pay the Porsche SE holding company 4.46 billion euros, or nearly $6 billion, plus one ordinary VW share to acquire the 50.1 percent in Porsche’s auto-making business that it doesn’t own. The single share allows VW to book the acquisition as an internal reorganization, which is advantageous in tax terms.
Under the new structure, the Porsche clan’s Porsche SE will own 50.7 percent of voting shares in Volkswagen, which will absorb Porsche’s car-making operations.
By retaining the Porsche and Piëch family interests in a holding company, “the families aren’t just among several shareholders of Volkswagen AG,” said Christoph Stürmer, Frankfurt-based analyst at IHS Automotive.
The German state of Lower Saxony retains a 20 percent holding in VW, and the veto power that comes with a stake that size, but it would no longer be the dominant shareholder facing near-constant disapproval from the European Commission.
The deal announced late Wednesday also settles a bitter dispute that pitted Porsche family members against one another.
Piëch and Porsche Chairman Wolfgang Porsche are cousins, both grandsons of Ferdinand Porsche, designer of the original Beetle.
While the family members appear to have settled differences, Porsche’s former star CEO Wendelin Wiedeking lost his job and is under investigation.
Other former Porsche executives are facing charges and lawsuits related to actions and statements made in 2009 when the firm piled on debt to finance its takeover bid for VW just as the global economy was sliding into the deepest downturn since the Great Depression.
Volkswagen turned the tables and pursued Porsche, but tax and legal issues held up the deal.
Shares in VW jumped 6 percent Thursday after the giant automaker said the deal would generate at least 700 million euros, or $880 million, per year in savings for the two companies.
“We can now cooperate even more closely and jointly leverage new growth opportunities in the high-margin premium segment,” said Winterkorn.
Fraser Hill, an analyst at Bank of America-Merrill Lynch, said the deal was a “clear positive” for VW, which obtains Porsche’s car-making business at a good price.
VW, which started out as the “people’s car” maker, expects eventually to generate more than half its operating profits from premium cars, executives said.
Analysts said the merger will turn up pressure on Germany’s smaller luxury carmakers — BMW AG and Daimler AG and its Mercedes-Benz Cars division.
“This raises the bar,” Stürmer said. He noted that Daimler has been looking for the right partner for years to generate economies of scale, while BMW is now expanding its cooperation in several areas with Toyota Motor Corp.


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