More than three years after talks first opened, the VW Group has finally agreed to terms with Porsche to buy the half of the sports car company that it does not already own. Volkswagen will spend £3.5 billion (Rs 30,460.5 crore on the purchase of the outstanding 50.1 percent of Porsche shares. The new set-up takes effect on August 1. Because VW also pays down Porsche’s debts of £1.9 billion (Rs 16,535.7 crore), the total cost will be £5.4 billion (Rs 46,996.2 crore).
"The accelerated integration will allow us to start implementing a joint strategy for Porsche’s automotive business more quickly, to realise key joint projects more rapidly, and hence to leverage additional growth opportunities in attractive market segments. It will also enable Volkswagen AG and Porsche AG to concentrate fully on their operating business by making day-to-day co-operation much simpler," said CFO Hans Dieter Pötsch.
Net synergies of approximately £258 million (Rs 2,245 crore) from the accelerated integration will be split 50:50 between the two companies.
“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. Combining their operating business will make Volkswagen and Porsche even stronger – both financially and strategically – going forward. We can now cooperate even more closely and jointly leverage new growth opportunities in the high-margin premium segment through targeted investments in pioneering products and technologies. This will benefit our customers, our employees and our shareholders,” said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft.
The announcement ends an extraordinary period of conflict between the two brands, after Porsche spent more than three years trying to execute a stealthy takeover of the vast VW Group. In early 2009 Porsche had acquired enough shares in VW to have just over 50 percent of the voting stake. At the time, the company said it was going to attempt to build its share to 75 percent.
The audacious bid by Porsche was beaten off partly because the state of Lower Saxony owns 20 percent of VW shares and by VW Group supremo Ferdinand Piech, who is the grandson of Ferdinand Porsche, founder of the sports car maker. After the failure of the bid, Porsche was undermined by the then £7.3 billion (Rs 63,531.9 crore) debts it ran up buying VW shares.
The deal has caused an outcry from some German politicians because VW will not have to pay a significant amount of tax since the deal has been classified as a ‘restructuring’.
Photo: Matthias Müller, Member of the Board of Management of Porsche Automobil Holding SE, and Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG, at the announcement in Wolfsburg on July 4.
(Hilton Holloway, Autocar UK)