Volkswagen AG, Europe’s largest carmaker, will seek shareholder approval to sell stock to help finance the purchase of Porsche SE’s sports-car operations.
Investors will be asked at an extraordinary meeting Dec. 3 to authorize the sale of as many as 135 million non-voting preferred shares in the next five years, Wolfsburg, Germany- based Volkswagen said today in a statement. The sale, which could raise as much as 10.5 billion euros ($15.6 billion) based on the preferred stock’s closing price yesterday, would begin in the first half of 2010.
‘It’s a huge number, and it’s a bit of a shock when you look at it,’ said Philippe Houchois, an analyst with UBS in London. ‘But it’s wise to get big numbers. It’s a safe option in case anything goes wrong.’
Volkswagen agreed in August to pay 3.3 billion euros for a 42 percent stake in Porsche’s vehicle-manufacturing business as part of a gradual merger with the maker of the 911 sports car. To finance the deal, the company has said it needs to raise at least 4 billion euros. Volkswagen aims for full integration of Porsche by 2011, adding it to a lineup that include the Skoda and Seat divisions and luxury Audi and Lamborghini brands.
The settlement was reached after debt at Stuttgart, Germany-based Porsche tripled to more than 10 billion euros in six months following the company’s failed takeover of Volkswagen. Porsche owns 53 percent of Volkswagen common stock, which carries voting rights.
Volkswagen preferred stock fell as much as 3.87 euros, or 5 percent, to 74 euros and was down 4 percent as of 12:21 p.m. in Frankfurt trading. The common shares rose as much as 1.65 euros, or 1.4 percent, to 120.90 euros and were up 1.4 percent.
Norway’s $445 billion oil fund demanded earlier this month that Volkswagen cancel the Porsche merger, saying the deal favors the families that control the sports-car manufacturer. The fund, which doesn’t disclose current holdings, owned about 0.4 percent of Volkswagen’s common shares at the end of 2008. Four members of the Porsche-Piech clan, including Chairman Ferdinand Piech, hold seats on Volkswagen’s 20-person supervisory board.
Volkswagen’s preferred shareholders rejected a proposal in April to issue as many as 151 million new shares. Owners of the common shares had approved the plan.
The new proposal would give management authorization until Dec. 2, 2014, to issue the preferred shares, the company said. The plan only needs approval from owners of common stock because shareholders will be given first rights to buy the new shares, said Michael Brendel, a Volkswagen spokesman.
In addition to the stock sale, shareholders will consider a proposal to grant the German state of Lower Saxony, Volkswagen’s second-largest owner, the right to appoint two supervisory-board representatives as long as it holds at least 15 percent of the common stock.
Volkswagen will also propose that certain measures require an 80 percent voting majority for approval, the company said today. The measure would solidify the blocking minority of Lower Saxony, which owns just over 20 percent of the common stock. Wolfsburg is located in the state.
Targeting No. 1 Spot
‘The shareholders’ meeting may make far-reaching decisions ranging from the issuance of new preferred shares to changes in the company charter,’ Lower Saxony Prime Minister Christian Wulff, said today in an interview in Berlin. ‘Volkswagen is committed to becoming the world’s biggest carmaker and those steps will help the company achieve it.’
VW said separately that its worldwide market share expanded to 11.7 percent in the first nine months of 2009, with deliveries totaling 4.76 million vehicles, from a 10 percent share a year earlier. Demand in China, Brazil, and Germany helped hold the sales decline in the period to 0.5 percent, compared with a 12 percent industrywide drop.
Asked whether he expects Volkswagen to expand its collection of businesses any time soon, Wulff said: ‘Lower Saxony trusts that the VW board will make the right decisions when the time is right.’
VW Chairman Piech said in September that the automaker may acquire two more brands after Porsche, declining to identify potential targets. VW controls Swedish truckmaker Scania AB and owns a 29.9 percent stake in Munich-based MAN AG, Europe’s third-biggest maker of heavy vehicles.