Porsche is to take a 20 per cent stake in Volkswagen in an attempt to prevent any hostile takeover of Europe's biggest carmaker that could threaten the business ties binding the two companies.

VW has become not only an important development partner for Porsche but also an outlet for about 30 per cent of its sales volume.

Porsche said yesterday that it would fund the purchase of the stake, worth about £2 billion from currently available liquid funds.

It added that it might add to its current stake of below five per cent by buying shares on the open market.

Porsche said it was working together with VW's management in the matter and did not intend to take over VW.

"The stake will in no case reach the level at which Porsche would have to make a public offer to take over Volkswagen," it said in a statement.

The acquisition of 20 per cent of VW by Porsche would give Porsche, VW's home state of Lower Saxony and Volkswagen itself, a combined majority stake of 51.2 per cent.

Lower Saxony is the largest VW shareholder now with 18.2 per cent of its voting rights.

Volkswagen itself holds another 13 per cent voting stake in treasury shares.

VW, a German icon, is shielded from hostile takeovers by a 1960 law that caps shareholders' voting rights at 20 per cent, giving Lower Saxony effective control of the carmaker through its minority stake.

But the European Commission, which has repeatedly asked Germany to scrap the so-called VW law, last year took Germany to court over the matter, saying it violated European laws on freedom of investment.

Porsche said it was expecting the law to be overturned, and therefore wanted to prevent a hostile takeover by investors who might not have VW's long-term interests at heart.

"Our planned investment is the strategic answer to this risk," Porsche chief executive Wendelin Wiedeking said.

VW shares rose by more than 17 per cent last week as rumours grew that a major strategic investor may be building a stake.

Porsche builds its Cayenne offroader with Volkswagen and also is working with VW on developing fuel-saving hybrid technology.