VW and Porsche Merger Agreement

123jump.com Staff
13 Aug, 2009
New York City

The deal between Porsche and Volkswagen will end the merger story that involved two rival founding families and regional governments and several banks in the last four years.

[R]5:20 PM New York – The deal between Porsche and Volkswagen will end the merger story that involved two rival founding families and regional governments and several banks in the last four years.[/R]

Volkswagen will acquire 42% stake in Porsche ending a four-year battle that pitted Porsche and VW against each other.

Volkswagen will pay €3.3 billion for 42% stake in Porsche that will create a European giant with annual sales of 6.4 million vehicles.

Both companies hope that merger will catapult the group to the number one auto maker in world surpassing Toyota in sales and profit.

The merger will be conducted in several stages with the 42% stake in Porsche acquired in 2009 and the rest by 2011.

Volkswagen will raise capital through preference share issue in the first half of 2010 that will value the luxury sports car maker for €12.4 billion.

Though the deal is widely expected to completed by 2011, it still requires shareholder approval and Volkswagen will conduct due diligence that may trim the valuations of the company.

Volkswagen in the press release estimated that in the long term the operating profit of the group will increase to €700 million.

Volkswagen may also acquire options on VW shares from the sovereign fund controlled by Qatar.

The new financial structure will involve Lower Saxony, the Porsche and Piech families and several banks.

Porsche and VW will go through several round of financing that will complete the complicated merger by 2011.

Porsche family will also sell the largest auto distribution business that sells more than 400,000 vehicles, Austrian Porsche Holding Salzburg to Volkswagen.