Porsche Plans to Acquire Stake in VW

[RICO415]

http://start.earthlink.net/article/b...09251900581065

"BERLIN - Luxury sports car maker Porsche AG said Sunday it plans to acquire a stake of about 20 percent in Volkswagen AG, a move aimed at strengthening ties between the automakers and preventing a future hostile takeover of Volkswagen.

Porsche said Volkswagen has become "a significant supplier for about 30 percent of our sales volume" as well as "an important partner in development."

The two companies worked together to develop Porsche's Cayenne sport utility vehicle and Volkswagen's Touareg. They recently announced that they, along with Audi AG, were forming an alliance to develop hybrid engines.

"With this engagement, we want to secure our business relations with VW and also safeguard in the long term a significant part of our future planning," Porsche chief executive Wendelin Wiedeking said in a statement.

Stuttgart-based Porsche said it hoped the investment would enable it to head off any future hostile takeover of Volkswagen by investors "who do not have the longterm interests of VW as their aim."

That scenario could arise if the European Court of Justice rules against a German law that effectively prevents the company, Europe's largest automaker, from such a takeover.

"Our planned investment is the strategic answer to this risk," Wiedeking said. Porsche said it was in contact with Volkswagen's management.

The European Commission took Germany to court last year over the VW law. It has long argued that the decades-old law goes against the grain of the 25-nation bloc's single market principles, although German politicians claim it helps ensure stability at the company.

The Commission objects to provisions of the 1960 law privatizing Volkswagen that cap a shareholder's voting rights at 20 percent, regardless of the number of shares held, and requires a majority of 80 percent for "important decisions."

The state of Lower Saxony, where VW's Wolfsburg headquarters is situated, is currently the biggest shareholder, with a stake of 18.2 percent.

A 20 percent stake would currently cost Porsche more than $3.6 billion.

Porsche said its investment would not reach the 30 percent threshold that, under German law, would require it to make a public takeover offer for Volkswagen.

Volkswagen shares rose late last week amid rumors that a large investor was building up a stake in the company. On Friday, they closed up 3.4 percent at $62.49."

[ASurroca]

Let's not forget, the upcoming Porsche Panamara will have Volkswagen underpinnigns as well. Could the VAG+Porsche family be coming back together again? After all, agreeing to co-engineer the Touareg and Cayenne is one thing, but acquiring a 20% stage in VAG is a whole different story.

I wonder if Ferdinand Piech had anything to do with this. Wait a minute, I'm sure he did. After all, he's got a huge stake in both companies, as well as the obvious familial ties.

This is exciting news. The anti-takeover law has allowed Volkswagen to become a huge mess of bureaucracy, making cost-cutting nearly impossible, but when that law eventually gets nixed, it looks like they still won't need to worry about a takeover. I presume this will also benefit Porsche in that future deals between VAG and Porsche should be a lot easier if the companies are this closely tied.

Hey, perhaps for their next trick, Porsche should build a Lotus Elise fighter engineered off the Volkswagen Concept R platform?

[juston]

http://news.yahoo.com/s/nm/20050926/..._volkswagen_dc

FRANKFURT (Reuters) - Porsche (PSHG_p.DE) shares fell as much as 11.7 percent on concern its plan to take a 20 percent stake in Volkswagen (VOWG.DE) would wipe out cash that the world's most profitable carmaker might have given investors.

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While the non-voting stake in Europe's biggest carmaker would cost some 3.3 billion euros, Porsche said it could still finance projects such as its new Panamera sports coupe.

VW shares initially rose and then slipped as Porsche's plan torpedoed talk of a hostile bid.

The deal also sparked grumbling that VW's drive to slash manufacturing costs could lose steam if Porsche's entry secured majority control for Porsche, VW itself and the German state of Lower Saxony in an all-German public-private alliance.

"The recent surge in VW is now explained, but this deal is depressing confirmation that the old ways of German capitalism die hard," Sanford Bernstein analyst Stephen Cheetham said.

By 0929 GMT Porsche was down 9.5 percent to 613.48 euros, and VW was off 0.4 percent to 51.65 after touching a high of 52.75.

VW stock had soared 17 percent last week on heavy volume, prompting talk that a strategic investor was building a stake.

Porsche, which says it has less than 5 percent of Volkswagen, gave no details on how it intended to boost this. A spokesman declined comment on whether investment bank Merrill Lynch (NYSE:MER - news) was buying or had bought stock for Porsche.

Worried that a European court may overturn in 2007 Germany's so-called "VW law," which caps shareholders' voting rights at 20 percent, Porsche says it had to act to prevent any VW takeover that could disrupt stable business ties.

Volkswagen makes the chassis for Porsche's Cayenne offroader and is working with Porsche to develop hybrid engines. VW supplies 30 percent of the content in Porsche's sales volume.

GERMAN PERSPECTIVE

Lower Saxony, VW's home state, is the largest shareholder now with 18.2 percent of VW voting rights and reaffirmed on Sunday it was committed to holding its VW stake. Volkswagen holds a 13 percent voting stake in treasury shares.

VW has made clear it cannot sell its treasury shares unless this is linked to an acquisition. For instance it planned to sell a big stake to the Gulf emirate of Abu Dhabi last year to help finance the purchase of a 50 percent stake in fleet management business LeasePlan, but these talks fell through.

"The decisive thing for the development of VW shares in the next few days is whether and at what price Porsche can acquire the 13 percent of shares that VW holds itself," said Stephan Droxner, analyst at Landesbank Baden-Wuerttemberg.

No VW officials were immediately available for comment.

"The state government has been in contact with various automakers for a long time, because we have known for years of American carmakers' interest in getting into Volkswagen," Lower Saxony state Premier Christian Wulff told the Hannoversche Allgemeine Zeitung paper.

"We tried to cooperate with the United Arab Emirates. Porsche offers a German perspective. We can generate synergies."

Turning to Porsche also draws on long-standing family ties.

Volkswagen Chairman Ferdinand Piech, whose family is a main Porsche shareholder, is the grandson of Porsche's founder, Ferdinand Porsche, the man who developed the legendary VW Beetle as a "people's car" for Adolf Hitler.

Deutsche Bank cut its rating on Porsche shares to "sell" on Monday, setting a price target of 550 euros per share.

JP Morgan suggested taking profits in both stocks.

But CSFB recommended buying into weakness in Porsche shares, noting the deal made long-term strategic sense by securing production of the Cayenne and perhaps using spare VW capacity at some stage to make the four-door Porsche Panamera.

(Additional reporting by Jan Schwartz in Hamburg, Andrea Lentz in Frankfurt and Lincoln Feast in London)

[ASurroca]

News breaks out, then gets refuted within one day. Let's call this a "developing story", shall we?

[Herbie3Rivers]

I was reading that Porsche already owned 5% of VW. I guess this is a good thing. Especially considering the history of the two companies.

[ASurroca]

Regardless of how this story pans out, it appears that Porsche and Volkswagen will be working more closely together than they have in the past. The Panamara will be another joint-venture model, a la Touareg/Cayenne.

It appears that some investors are balking at this news, citing that spending so much money to buy 20% of VAG doesn't appear cost-effective. However, it is apparent that Volkswagen is going to be a large part of Porsche's future returns. Between the Cayenne and Panamara, that's probably going to be at least half of all Porsche sales right there. If Volkswagen were taken over, the partnership might be threatened, and this means that Porsche's future big-sellers would be threatened.

Naturally, neither company has commented on any of this yet.

[kcfoxie]

I don't know if it's just because I'm now old enough to understand and/or give a penny about it.. but a LOT of corporate mergers, selloffs and buyouts have been happening worldwide as of late. Are we in the end times for business or something?

[Porkchop]

Originally Posted by kcfoxie

I don't know if it's just because I'm now old enough to understand and/or give a penny about it.. but a LOT of corporate mergers, selloffs and buyouts have been happening worldwide as of late. Are we in the end times for business or something?

There are always M&A cycles in business... businesses merge when it looks like it will create synergy (ExxonMobil for instance) or they spin off businesses when it makes more sense to do so (Genworth, GE's finance division).... nothing to see here.

[kcfoxie]

yeah I was told "nothing to see here" when AT&T was bough by CIngular too. Well, as long as like Ford or Chevy doesn't buy Volkswagen I think I'll be OK.

[mgwerks]

Let's not forget that great VW+Porsche collaboration, the 914.

[kcfoxie]

Originally Posted by mgwerks

Let's not forget that great VW+Porsche collaboration, the 914.

'the bastard porsche' that looked like a pregnant beetle?

[ASurroca]

Originally Posted by kcfoxie

yeah I was told "nothing to see here" when AT&T was bough by CIngular too. Well, as long as like Ford or Chevy doesn't buy Volkswagen I think I'll be OK.

Good point. Things like this tend to be preceded by execs being suspiciously mum and a lot of "no comment" talk.

I'm crossing my fingers that it's not just a rumor. The more I read up on it, the more credible it appears. We'll probably know for sure what's going on in the coming weeks, when one of the companies finally breaks the "no comment" veil and makes an announcement.

[kcfoxie]

Originally Posted by ASurroca

Good point. Things like this tend to be preceded by execs being suspiciously mum and a lot of "no comment" talk.

I'm crossing my fingers that it's not just a rumor. The more I read up on it, the more credible it appears. We'll probably know for sure what's going on in the coming weeks, when one of the companies finally breaks the "no comment" veil and makes an announcement.

time tells all. I like your avatar

[ASurroca]

As it turns out, Volkswagen has released an official word on the Porsche-VW deal. I hadn't noticed this one, but here it is for your perusal:

25 September 2005
VOLKSWAGEN WELCOMES PORSCHE’S INTEREST IN A STRATEGIC PARTICIPATION
Germany’s position as an automotive and technology basis strengthened


WOLFSBURG, Germany - Porsche AG, Stuttgart, today announced its interest in acquiring some 20 percent of the voting capital of Volkswagen AG.

For Porsche, the move is motivated by the fact that Volkswagen has not only become an important development partner, but also a major technology and production partner for some 30 percent of sales.

Speaking on behalf of the Board of Management of the Volkswagen Group, its Chairman Dr. Bernd Pischetsrieder welcomed the strategic interest of Porsche AG in participating in the company. He said a stable shareholder structure was very important for the automotive business with its long term orientation.

Volkswagen and Porsche have already been cooperating on projects such as the Touareg/Cayenne for quite some time. The partners recently announced technological cooperation in the field of hybrid powertrains at the International Motor Show (IAA) in Frankfurt. Volkswagen welcomes the additional support brought to this cooperation by a participation which lends further weight to these collaborative efforts.

The participation envisaged by Porsche also substantiates one of the Volkswagen Group’s own business policies; for the automotive business with its long term orientation, a stable shareholder structure is very important.

source: VW Press Release

[Steinola]

Originally Posted by kcfoxie

'the bastard porsche' that looked like a pregnant beetle?

Uhhh... how can a Beetle look any more pregnant than it is??

I always thought the 914 looked like a Triumph TR7 crossed with an MG..
The 914 was a pretty cool car, actually... the mid-mounted engine made it handle great. Unfortunately it also made it incredibly expensive to service.

[Atomic Glee]

I love the 914.

Of course, the ties go even more deep. Ferdinand Porsche is the creator of the Beetle, after all, not to mention the 356 being so similar to the Bug in mechanics.

[kcfoxie]

Originally Posted by Steinola

Uhhh... how can a Beetle look any more pregnant than it is??

I always thought the 914 looked like a Triumph TR7 crossed with an MG..
The 914 was a pretty cool car, actually... the mid-mounted engine made it handle great. Unfortunately it also made it incredibly expensive to service.

I have my models confused. What was the model that looked like a large bug? (Now that I know it's not the 914 I'm going to scower the net and ask Alex next time I see him for the photo again... perhaps it was a custom job afterall).

I found this: (http://www.cybersteering.com/cruise/...h/porsche.html)

I'm going to stop trusting my photo memory, this makes time #2 that I could swear I saw something that was an obvious dream

[red_rock_beetle]

thats a porsche 356
i own a 914 and they look nothing like a beetle(witch i also have)