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VW takes over Porsche

2009-07-23 16:35

The board of the giant German carmaker Volkswagen agreed Thursday to to forge a new global automotive powerhouse by mounting
a two-step 8-billion-euro, takeover of the legendary sports vehicle group Porsche.

Announcing the agreement, Volkswagen chief Martin Winterkorn said the way was now free for the creation of an integrated
VW-Porsche group with the sports carmaker to remain an independent brand.

The new combined VW-Porsche group would be "a major force" in the world car business.

Meeting in Stuttgart, the VW supervisory board decision turns the tables on Porsche, which had been forced to abandon an audacious bid to acquire VW after wracking up about 10 billion euros in debt in a David-and-Goliath battle to buy Europe's biggest carmaker.

The prospect of Volkswagen now seizing control of Porsche came in the wake of the luxury sportscar maker's announcement Thursday
that its chief, Wendelin Wiedeking was stepping down after opposing VW's takeover ambitions for Porsche.

The Volkswagen decision to back the takeover plan represents a major victory for its supervisory board chairman Ferdinand Piech,
after the protracted merger battle triggered a power struggle among the two families controlling Porsche and VW.

Under the VW takeover plan, the Wolfsburg-based motor vehicle group is expected to pick up an initial 49.9-per-cent stake in Porsche and then buy the rest at a later date at a total cost of about 8 billion euros.

The ownership of the new merged VW-Porsche group would be split between a more-than-50-per-cent stake held by the current
controlling clans - the Porsche and Piech families.

Another 19 per-cent stake would then be held by the Qatar Investment Authority and about 20 per cent would be in the hands of
the German state of Lower Saxony, where Volkswagen is based.

Under the integration plan, VW and Porsche would together forge a carmaker with 10 brands.

This includes VW's nine brands from premium saloons such as Lamborghini and Bentley through to its more mass market brands such
as Skoda and its flagship Volkswagen. Porsche will be the 10th brand in the new group.

But analysts say the VW takeover push has left open several key questions including the details of the link between the new VW-led
carmaker and the oil-rich Qatar.

Held in Porsche's hometown of Stuttgart in southern Germany, the VW board meeting followed an all-night extraordinary session of the
Porsche board, which gave the green light to talks aimed at securing a deal worth up to 5 billion euros with Qatar.

This could enable the state-owned Qatar Investment Authority to buy a stake in Porsche SE, the group's holding company, which
Porsche said would help lay the foundations for integration moves with VW.

In addition, the Porsche board meeting approved a plan to raise 5 billion euros in capital.

Both the capital injection and a deal with Qatar are designed to help Porsche cut the hefty debt it ran up in gaining a 51% stake in VW after slumping world car sales and the global credit crunch undercut its takeover push.

Wiedeking, who had been at Porsche's steering wheel for 16 years, will be succeeded by the company's chief production executive Michael Macht.

A Porsche board member for 11 years, 48-year-old Macht is seen in the German car industry as both a Wiedeking protege and having
the authority to negotiate with VW over the planned merger.

Porsche's financial chief Holger Haerter is to leave the company as well.

Both Wiedeking and Haerter are stepping down immediately and have also resigned their seats on the supervisory boards of Volkswagen and Audi, a subsidiary of the Volkswagen Group.

Wiedeking, whose contract was to expire in 2012, is to receive a 50-million-euro severance, half of which is to be donated to a charity, while Haerter is to be paid 12.5 million euros.


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