IHS Global Insight Perspective | |
Significance | Porsche has rejected a bid of up to 4 billion euro for a 49% stake in the sports carmaker from VW, and has also stated that it has received an official bid from the Qatari Investment Authority for its VW share options and a stake in the Porsche holding company. |
Implications | Porsche desperately needs to shore up its balance sheet and has been in talks for some time with the Qatari Investment Authority. Porsche and VW agreed to discuss ways for both companies to become integrated following Porsche's stalled takeover of VW, but Porsche's management is reluctant and has been trying to secure other sources of funding. |
Outlook | The offer from VW appears to be near the figure that Qatar was reported as willing to pay, and in terms of VW and Porsche maintaining their independence and shareholding structure, the VW offer appears a neat solution to an outsider. However, in the context of the battle for control of the VW-Porsche group it appears unlikely that Porsche's management will cede to their counterparts at VW. |
Porsche has rejected an offer from Volkswagen (VW) to purchase a 49% stake in the sports carmaker for a sum of around 4 billion euro (US$5.6 billion), according to a Financial Times (FT) report. According to the report, Porsche has said that VW's management submitted the offer to Wolfgang Porsche, the chairman of the company's supervisory board, while claiming that the offer should have been formally submitted to the executive board instead. Porsche also added that it had rejected the offer as it would have meant renegotiating its existing 10.75-billion-euro credit facility. Porsche has also confirmed that the Qatar Investment Authority (QIA) has formalised an offer to acquire a stake in either Porsche and/or its remaining options on VW shares. Reuters quoted a Porsche spokesperson as saying, "We received an offer from the Qatar Investment Authority concerning an investment in Porsche SE and the purchase of options in Volkswagen (AG) stock." It was also reported that Porsche and Qatar had yet to agree a price for the share options for more than 20% of VW's ordinary shares, although it is speculated that it is unlikely to be more than half the 250 euro per share at which they currently trade. However, this could still potentially be a profitable, or at least a very acceptable deal for Porsche, depending on what prices were paid for these options. Porsche had already announced that the QIA had reached a positive conclusion on its due diligence process and the two companies were heading into the "final stretch" in terms of formulating an agreement.
Porsche desperately needs a capital injection of some description after running up 9 billion euro of debt in its pursuit to gain control of VW, Europe's largest carmaker. However, the onset of the credit crunch has seen Porsche struggle to raise finance on the capital markets and after confirming that it had achieved a majority stake of 50.76% in VW in January (see Germany: 6 January 2009: Porsche Confirms Acquisition of Majority VW Stake; Takes Indirect Control of Scania), the company soon abandoned plans to increase this stake to a 75% share of VW, which would have given Porsche the ability to book VW's profits as its own. Porsche still controls cash-settled options on around 25% of VW's shares, which Qatar is now negotiating to purchase.
Outlook and Implications
The management of Porsche, led by the company's major shareholder Wolfgang Porsche, CEO Wendelin Wiedeking and CFO Holger Härter appear to be determined to do everything they can to retain their power and influence over the future of Porsche and VW, and in whatever structure the two companies have going forward. As a result, despite releasing a statement with VW at the beginning of May (see Germany: 7 May 2009: Porsche and VW Agree Merger) saying that they would work together with their counterparts at VW in creating what was described as an "integrated car manufacturing group", this sentiment has now been replaced with "In the final structure ten brands shall stand below an integrative leading company." However, it appears that the two management groups involved have very different ideas over how this company should be structured and who should ultimately be in control. On the side of VW is powerful VW supervisory board chairman Ferdinand Piëch, chairman of the management board of VW, Martin Winterkorn, influential Premier of the State of Lower Saxony Christian Wulff and powerful VW works council leader Bernd Osterloh. The offer to acquire a 49% stake in Porsche and create a series of cross holdings in both companies is designed to retain the full autonomy of VW and Porsche's management and owners, as well as no doubt putting VW's management group in the driving seat in terms of shaping the future of the two companies. This would be inevitable given the near-equal proposed shareholdings and the fact that in 2008 Porsche sold 98,000 units in comparison to the 6.2 million sold by the VW Group. However, Porsche is trying all avenues to resist becoming another arm of the VW empire and is now putting all its hopes into an alliance with QIA. Previous reports claimed that Porsche was looking to sell 25% of the Porsche Holding Company for 2.5 billion euro, and it is possible that this could be combined with a deal to sell its options on the VW shares. Whether this is enough to maintain the influence of Porsche management in the complex battle to decide the future of both companies remains to be seen.