Porsche Rejects VW Takeover Offer

[asian_XL]

http://www.businessweek.com/globalbi...630_832724.htm



Summary: The power struggle between German automakers Porsche and Volkswagen escalated on Monday with Porsche rejecting VW's takeover bid as unfeasible. That means Porsche still hasn't found a solution for its debt problems, and time is running out.

Porsche, the debt-laden German sports carmaker, on Monday rejected Volkswagen's offer to buy a 49 percent stake as the damaging power struggle between the two companies escalated. "It's not a viable option to sell 49.9 percent of Porsche AG to VW," a Porsche (PSHG_P.DE) spokesman told German news agency DPA.

The spokesman said Porsche couldn't accept the offer because it would then have to immediately pay back the €10.75 billion ($15.06 billion) loan it has secured from a banking consortium. Earlier, Christian Wulff, governor of the German state of Lower Saxony which owns a 20 percent stake in VW (VOWG.DE), called on Porsche to reach a decision soon on the proposed takeover. According to information obtained by SPIEGEL, Wulff and VW's management have demanded that Porsche agree to a merger by the end of June. Under the plan, VW would acquire 49 percent of Porsche for between €3 billion and €4 billion, which would enable Porsche to pay back a large part of the debt it incurred trying to acquire a majority of VW last year.

The supervisory board chairman of Porsche, Wolfgang Porsche, and works council chief Uwe Hück responded to the offer by issuing a joint statement saying: "We will not be blackmailed."

Porsche's tough stance could worsen its problems. According to business daily Handelsblatt, the emirate of Qatar, the last prospective investor that could still preserve Porsche from being swallowed up by Volkswagen, has called for a decision soon and is only interested in buying a stake in a merged VW/Porsche group, not in either of the two companies separately.

The dispute pushed down VW stock by up to five percent to €237 on Monday. "The quarrelling between VW and Porsche is weighing on the stock," one share trader said. "The investors are worried that the companies are focusing too much on their power struggle and not enough on their business."

1 year ago....when porsche tried to take over VW
http://www.motorauthority.com/porsch...-above-50.html

Updated: The European Commission has finally given permission for Porsche to acquire control of the Volkswagen Group, something the German sports carmaker previously confirmed it would do before the end of the year. Porsche’s supervisory body authorized the purchase of a majority stake in Volkswagen, about $15.73 billion worth of shares, as far back as March. This would take Porsche’s current holding of about 31% beyond the 50% mark, giving it control of the entire Volkswagen Group.

The German state of Lower Saxony, however, VW's second-biggest shareholder with around 20% of voting rights, said it plans to keep its stake. This means that decisions made by Porsche, even with a controlling stake, could be blocked by the state.

Original: Porsche has released a statement announcing plans to increase its stake in Volkswagen Group to more than 50% by the end of the year. Porsche’s current shareholding remains at 31% but an increase beyond 50% would effectively give it control of the German giant.

The statement said the goal is also for Porsche and Volkswagen to continue on the path of growth under the holding company Porsche Automobil Holding but to also retain their independence. "Porsche will also remain Porsche in the future. And Volkswagen will also remain Volkswagen. That is the success formula," Porsche CEO Wendelin Wiedeking said in the statement.

There remains fears that sports car programs from Audi, Bentley and Bugatti that could potentially compete with Porsche’s sports cars could be canceled once the Stuttgart-based carmaker takes control, reports Automotive News.

The announcement comes less than a week after Germany approved a revised version of its 48-year old VW Law, which mandates that any major strategic decisions within VW would still have to be approved by just over 80% of shareholders. This means that decisions made by Porsche, even with a controlling stake, could be blocked by the German state of Lower Saxony, which still holds 20% of VW.

[heleu]

Porsche is screwed; they borrowed too much money to try to buy VW earlier. Now they are paying the price and going to EVERYONE to try to borrow money to cover their current debt. VW is going to win sooner or later.

[impactX]

How are they screwed?

I just went and pulled Volkswagen AG's annual filing. To simplify it: As at January 5, 2009, Porsche held 50.76% of voting rights of Volkswagen Aktiengesellschaft. VWAG really shouldn't play with fire. They would end up forcing Porsche to put some of its people onto the VWAG board instead of retaining their currect structure.

[BEEB]

VW should just stop supplying parts to Porsche ! end of story !

[yvrnycracer]

When porsche starts to look for a bailout... who will be there to gobble them up...

Or vw could just cut off cayenne production and not provide them with the TDI engine... This merger will eventually happen... the family's need to stop acting like school children...

[Gt-R R34]

in Jan. i read this amazing article in HKG edition of Economist, about Porsche and how in 2008 they basically slowly bought the shares of VW because of the decline of the world auto sector, they hedge lots of bets and made a tonne of money in 2008 regarding this situation.

The average holding cost of their stocks in VW is a close guarded secret but based on the assumed buying window, VW avg share price that porsche bought it for was 150Euro.

Basically if it was in financial trouble, they could technically sell all the shares and make a (based on today market price.) 60% profit margin in 1 year.

It was an amazing story, on the insight from Porsche's CEO.

[skyxx]

^ Yeah I heard about that too. Pretty amazing stuff!!!

[impactX]

Originally Posted by yvrnycracer

When porsche starts to look for a bailout... who will be there to gobble them up...

Or vw could just cut off cayenne production and not provide them with the TDI engine... This merger will eventually happen... the family's need to stop acting like school children...

Porsche is the controlling shareholder with more than 50% voting right of VWAG, which is a public company; the board of directors of a public company needs to act in the best interest of the shareholders.

Porsche chose to let VWAG run with the existing structure despite being the controlling shareholder, this could potentially be changed if the board of directors of VWAG doesn't smarten up and keeps pissing off the people at Porsche.

[heleu]

Originally Posted by impactX

Porsche is the controlling shareholder with more than 50% voting right of VWAG, which is a public company; the board of directors of a public company needs to act in the best interest of the shareholders.

Porsche chose to let VWAG run with the existing structure despite being the controlling shareholder, this could potentially be changed if the board of directors of VWAG doesn't smarten up and keeps pissing off the people at Porsche.

It doesn't work like that in Germany. They have archaic laws that limit the power of an individual shareholder to 20% of the vote even if you own the majority of the shares.

Porsche is in trouble because they have huge current debt; i.e they need to pay back the banks interest + principle in relatively short period of time.

As for the economist article in January, another one came out in May:
http://www.economist.com/businessfin...TOKEN=77351944

...you can bet that if Porsche actually takes over VW, you can say goodbye to a bunch of sports cars: Audi R8, Audi TT...etc.

[rcoccultwar]

Probably old news here but after reading in November about a major shareholder jumping in front of a train, it had you wondering if this Porsche-Volkswagen roller-coaster ride had anything to do with it.

Seems like very weak numbers here but just means that much more potential for recovery. The early 90's financials for porsche was pretty crummy but this formulae for recovery appears to be way more complex if this is to happen.

Its looking pretty grim for all manufacturers. The Economist had a nice article on Fiats strategy a couple months ago..You can pretty much expect to see more and more platform sharing and like heleu implies; less and less low volumn platforms that we have grown to love.

[impactX]

Originally Posted by heleu

It doesn't work like that in Germany. They have archaic laws that limit the power of an individual shareholder to 20% of the vote even if you own the majority of the shares.

Porsche is in trouble because they have huge current debt; i.e they need to pay back the banks interest + principle in relatively short period of time.

As for the economist article in January, another one came out in May:
http://www.economist.com/businessfin...TOKEN=77351944

...you can bet that if Porsche actually takes over VW, you can say goodbye to a bunch of sports cars: Audi R8, Audi TT...etc.

It works like that in Germany now because EU has revoked the "Volkswagen law" last year, and that was why Porsche slowly gained more shares in VWAG to prevent a takeover from another company; even VWAG's annual filing for last year stated that Porsche would be holding more than 50% voting rights in VWAG as of January 2009.

[EndLeSS8]

Call me really really slow, but when the heck did Porsche get so much debt?
The last time I checked (which was back in 1999), they were doing poorly, but the sales of the Boxster saved them and brought them wayy back up. If they were doing so poorly (which I was completely unaware of) then why do they keep on coming up with new models of their Turbo and brand new models like the Cayman? I thought the Cayenne sold really well, right?

[impactX]

They borrowed money last year to buy VWAG, they could always sell VWAG off to recover the money.

[heleu]

I wonder if they can for a few reasons:
Is the stock price the same as what it was when they bought it?
Are there enough buyers willing to buy in this market?

At the end of day, cash is king. Regardless of what it says on their balance sheets, they are going to have to do something when the debt is due this year and the creditors come knocking asking for money.

[ilvtofu]

Wasn't that old ceo getting paid like a million a day?

as a porsche fan, I hate to say it but they kinda had it coming, trying to buy something they couldn't afford, and cough*panamera*cough

[Jermyzy]

Looks like it's happening now!

http://ca.yahoo.com/s/937416

"VW to pay $11.28 billion for all of Porsche: report
Module body

Sat Jul 18, 7:43 AM


FRANKFURT (Reuters) - Porsche SE's controlling families will agree on Thursday to accept an offer by Volkswagen to buy its sports car business Porsche AG for roughly 8 billion euros ($11.28 billion), Der Spiegel reported on Saturday.

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Germany's leading weekly magazine wrote that the rival Porsche and Piech clans, which own 100 percent of Porsche SE votes, will approve the two-stage takeover at a supervisory board meeting on July 23.


Volkswagen would purchase a 49.9 percent stake in Porsche AG and at a later date acquire the rest, in a deal that would create an integrated automotive group with 10 brands under the leadership of the Wolfsburg-based carmaker.


The sale would help Porsche SE pay off most of its debt, which two sources told Reuters has ballooned to considerably more than 10 billion euros.


Der Spiegel also said embattled Porsche SE and Porsche AG Chief Executive Wendelin Wiedeking is negotiating over a severance package that could total more than 100 million euros. In the meantime, production chief Michael Macht will replace him as head of Porsche AG, the magazine reported.


On Thursday, Wiedeking rejected speculation he was about to leave the group.


Asked on Saturday whether the two families have reached a decision for the July 23 board meeting, Porsche spokesman Anton Hunger said "we have not been informed of one," adding that the Spiegel report was speculation that the company would not comment on.


Separately rival German weekly magazine Focus reported that Volkswagen's powerful chairman and part-owner of Porsche, Ferdinand Piech, plans to remove Wiedeking on Thursday from the influential six-man steering committee on the VW supervisory board.


The vacancy could open up the opportunity for Piech's cousin and rival, Wolfgang Porsche, VW supervisory board member and Porsche SE chairman, to replace Wiedeking in the committee as a representative of his side of the family.


The grandfather of Wolfgang Porsche and Ferdinand Piech was Ferdinand Porsche, designer of the Beetle and founder of Volkswagen.


(Reporting by Christiaan Hetzner; Editing by Victoria Main)"

[heleu]

The sale would help Porsche SE pay off most of its debt, which two sources told Reuters has ballooned to considerably more than 10 billion euros.

Like I said originally; Porsche screwed themselves over borrowing too much money.

This is bad news for sports cars enthusiasts; I doubt VW is going to entertain Lambo, Audi, and Porsche competing against each other (e.g. Gallardo vs 911 turbo vs R8 or Lambo Estoque vs S8 vs Panamera) I am sure there are going to be some model cuts.

[skyxx]

^ Doubt it.

[thumper]

wow. hell has frozen over...