--Porsche to join VW's stable of brands
--Companies to benefit from more cost savings faster
--VW labor chief dismisses concerns over tax bill
FRANKFURT--Volkswagen AG (VLKAY, VOW.XE) said Wednesday it will take
over in August the remaining 50.1% stake in Porsche Automobil Holding
SE's (POAHY, PAH3.XE) sportscar unit it doesn't already own for 4.46
billion euros in cash plus one common share, as the two German auto
makers hammered out an accelerated deal to reap more cost synergies
faster.
"The unique Porsche brand will now become an integral part of the
Volkswagen Group--that is good for Volkswagen, good for Porsche and
good for Germany as an industrial location," Volkswagen Chief
Executive Martin Winterkorn said in a statement.
The final agreement to add Porsche to Volkswagen's stable of 10 car
and truck brands draws a line under one of the most spectacular
takeover bids in the European car industry in recent years, which
eventually backfired badly.
Porsche initially acquired a minority stake in Volkswagen to benefit
from better economies of scale, but then bypassed disclosure rules
through a complex set of stock options to acquire additional voting
stock in Volkswagen. When Porsche revealed in October 2008 that it had
direct and indirect access to almost 75% of Volkswagen's voting stock,
VW's common stock skyrocketed above EUR1,000 per share and temporarily
made the Wolfsburg, Germany, firm the world's most valuable company.
Mr. Winterkorn also became CEO of Porsche's holding company after
Porsche's ill-fated attempt to take over the much larger Volkswagen
finally collapsed in 2009. After a fierce power struggle that raged
for more than two years, Porsche had to finally agreed to a deal under
Volkswagen's leadership as its debt ballooned in the wake of the
financial crisis.
Volkswagen, Europe's largest auto maker by sales volume, agreed at the
time to pay EUR3.9 billion for a 49.9% stake in Porsche's sportscar
business as part of a complex deal to bail out the holding company.
Volkswagen and Porsche also granted each other options to integrate
the remaining 50.1% into Volkswagen at a later stage, if a
full-fledged merger including Porsche's holding company failed to be
finalized by the end of 2011. The two companies had to abandon the
plan last year due to legal obstacles. Porsche's holding firm,
however, still holds a 50.7% voting stake in Volkswagen. But it will
remain a separate entity for the time being amid several pending
lawsuits that allege Porsche of cornering the market during its
attempt to take over Volkswagen.
"Combining their operating businesses will make Volkswagen and Porsche
even stronger--both financially and strategically," Winterkorn said.
"We can now cooperate even more closely and jointly leverage new
growth opportunities in the high-margin premium segment," he said.
Porsche's sportscar unit, which sells the iconic 911 sportscar, the
Cayenne sport-utility vehicle, the Panamera four-door coupe and the
Boxter/Cayman models, is one of the world's most profitable auto
makers.
Volkswagen said the cash component of Wednesday's deal is based on the
equity value of EUR3.9 billion for the remaining shares in Porsche's
sportscar business as agreed in 2009 plus additional items including
anticipated dividend payments and Porsche's share in the expected cost
synergies that can now be reaped faster. It said the net cost
synergies through the accelerated deal are worth around EUR320
million.
Porsche said it will use the EUR4.46 billion in cash to repay bank
liabilities of EUR2 billion, in line with previous statements. The
remaining money is supposed to be used for strategic investments in
automotive assets after Porsche changed its corporate statutes
accordingly last month.
"The accelerated implementation of the shared goal will make Porsche
SE a financially strong holding company," Porsche brand chief and
management board member of Porsche's holding firm, Matthias Mueller,
said in a statement.
Both Volkswagen's and Porsche's labor unions said they support the
deal as it creates transparency for both companies and improves
cooperation.
Volkswagen's labor chief, Bernd Osterloh, dismissed concerns voiced by
German politicians in recent weeks that the accelerated deal including
the transfer of one voting share means the companies avoid a large tax
payment of more than EUR1 billion. Through the share transfer, the
deal is viewed by tax authorities as a corporate reorganization
instead of an outright sale.
"The deal agreed now leads to a tax payment of more than EUR100
million," Osterloh said. He said a deal for an outright sale before
2014, which would have triggered a much larger tax bill, wouldn't have
been approved by the boards.
Mr. Winterkorn and Chief Financial Officer Hans Dieter Poetsch told
Porsche shareholders last month that a faster integration of Porsche's
sportscar unit into Volkswagen would improve earnings, which in turn
would lead to higher tax payments.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com
(END) Dow Jones Newswires
July 04, 2012 19:25 ET (23:25 GMT)
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