The creation of a new European automotive giant has moved a step nearer completion after Volkswagen bought a 42 per cent stake in the main production unit of Porsche.
VW, Europe’s biggest carmaker, agreed to pay up to 3.3 billion euros (£2.8 billion) this year for the initial stake in the loss-making Porsche SE business, paving the way for the creation of an “integrated” automotive group by the end of 2011, VW and Porsche said in statements after board meetings.
The deal also includes VW taking over Porsche Holding Salzburg, Europe’s biggest car dealer.
The business, which has an enterprise value of 3.55 billion euros (£3 billion), will be sold by 2011.
Volkswagen chief executive Martin Winterkorn, who is poised to run the combined entity, said the deal marked “a new era” for both companies.
“Porsche is a real enrichment for our company’s portfolio,” he said.
The combined company will have ten brands, adding the Porsche marque to a stable that already includes Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini.
To finance the purchase, Volkswagen plans a capital increase of preference shares in the first half of 2010, VW said.
Porsche’s surrender came at the end of a power struggle that eventually led to the departure of Porsche chief executive Wendelin Wiedeking. It marks a triumph for Mr Winterkorn and VW chairman Ferdinand Piech, a major shareholder in both companies.
Porsche had sought to seize control over Volkswagen as a way to gain access to the key components and technologies it needs to meet stringent new pollution rules. That left it with just over half of VW votes.
But the takeover attempt backfired after Porsche took on more than £8.6 billion in debt, forcing it to seek help from VW, which supplies components for about a third of all Porsche cars, including bodies of the four-door Cayenne and Panamera models. Bernd Osterloh, head of VW’s powerful works council, welcomed the agreement, saying “industrial history” had been made.
Porsche also aims to raise capital by issuing new ordinary and preferred shares, probably in the first half of 2011.
The Porsche and Piech families will remain the largest shareholders in the company to arise from the combination of VW and Porsche SE, Mr Winterkorn said. VW’s home state of Lower Saxony, which owns a stake of 20 per cent in the carmaker, will retain the right to block important decisions and to nominate two members of the supervisory board.
The deal is set to make the Gulf state of Qatar the third-largest investor in the combined company, Mr Winterkorn said, without specifying how large a stake it will hold.
The fight over ownership of the two companies, in effect a family feud between the Porsches and Piechs, has alarmed some German business leaders who are unused to publicly-fought takeover battles. One unnamed chief executive of a large German company said: “It is embarrassing and almost unbelievable.”
Hans Hirt, head of European corporate governance at UK investment house Hermes, was quoted as saying: “The headlines of recent weeks reflect badly on the German system.”
Other commentators, however, said the battle was a transition in German corporate culture that signalled the advent of foreign ownership. That contrasts with the old Deutschland AG system under which German companies owned each other via a complex system of cross-shareholdings.
