Porsche SE’s controlling shareholders, the Porsche and Piech families, agreed to pursue the creation of an integrated car company with its Volkswagen AG unit.
‘In the final structure ten brands shall stand below an integrative leading company alongside each other,’ Stuttgart, Germany-based Porsche said in a statement today. ‘The independence of all brands and explicitly also of Porsche shall be ensured.’
The families met in Salzburg, Austria today to hash out how to combine the sports-car maker with Volkswagen and reduce 9 billion euros ($12 billion) of debt, two people familiar with the matter said earlier. The proposals under consideration include merging the carmakers and finding an investor to buy a stake in the combined company or selling the Porsche AG automotive unit to Volkswagen in return for cash and shares, said one of the people, who declined to be identified because the talks are private.
‘Structural changes in Porsche’s makeup are inevitable,’ Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg who recommends buying Porsche shares and selling Volkswagen, said before the announcement. ‘No one at the Porsche-Piech families is under any illusions about the size of the debt.’
The Porsche and Piech families together control half of Porsche SE, which has accumulated 51 percent of Volkswagen since 2005 to protect ties to the company, its largest supplier. Porsche Supervisory Board Chairman Wolfgang Porsche has struggled to raise financing to increase the stake to 75 percent and is at loggerheads with Ferdinand Piech, his counterpart at Volkswagen, about how to unite the companies.
Porsche rose 70 cents, or 1.2 percent, to 56.95 euros in Frankfurt trading, giving the carmaker a market value of 9.94 billion euros. Volkswagen fell 84 cents, or 0.4 percent, to 232.69 euros, valuing the company at 73.9 billion euros.
The Porsche and Piech families failed to reach an agreement on how to lower Porsche’s debt and combine the automakers at a gathering on April 29, one person said.
Porsche Chief Executive Officer Wendelin Wiedeking is pushing a proposal to merge the two carmakers and allow Arab investors to bid for a stake, a person said. The plan may also require members of the Porsche and Piech families to acquire new preferred shares, the person said.
On the other hand, Ferdinand Piech, Volkswagen’s board chairman, wants to transfer Porsche’s car unit to Volkswagen, a plan opposed by his cousin, Wolfgang Porsche, according to the person.
‘Porsche will not be sold,’ Uwe Hueck, chief of Porsche’s works council, told Germany’s N-TV channel. ‘It’s time for the Porsche and Piech families to carry out a capital increase in order to cancel debt.’
Porsche, the maker of the 911 sports car, has been in talks for weeks with Arab investors including Qatar’s Emir Sheikh Hamad bin Khalifa al-Thani, the person said.
Qatar may invest in German carmakers, Qatar News Agency reported on April 28, citing Prime Minister Hamad Bin Jasim Bin Jaber al-Thani. Meetings have been held on the subject, though a decision hasn’t been made, he told QNA. A press officer for the prime minister didn’t respond to calls seeking comment yesterday.
Any agreement by the families will require approval of Volkswagen’s home state of Lower Saxony, which holds a 20 percent blocking minority in the Wolfsburg, Germany-based carmaker.
‘Lower Saxony expects the Porsche and Piech families to agree who will contact the state government for negotiations,’ a spokesman for the regional government said today by phone.
Volkswagen’s ties to Porsche go back to Volkswagen’s creation under the Nazi regime of Adolf Hitler in the 1930s. Ferdinand Porsche, the grandfather of Ferdinand Piech and Wolfgang Porsche, was the company’s first leader. Piech’s father, Anton Piech, married Porsche’s daughter and became Volkswagen’s director. The extended Porsche-Piech family controls all of the sports-car maker’s voting shares.
Volkswagen CEO Martin Winterkorn told shareholders on April 23 that he’s ‘confident’ that deepening ties with Porsche will let the companies increase profitability and market share. Wiedeking said in January that Volkswagen offers a ‘gold mine’ of saving potential.