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Winnipeg Free Press - PRINT EDITION
VW absorbs Porsche for $5.6B
Ends longtime takeover drama
Matthias Rietschel / THE ASSOCIATED PRESS ARCHIVES Tax authorities allowed Volkswagen to complete the Porsche takeover early. (CP)
BERLIN -- Volkswagen has agreed to buy the 50.1 per cent stake in Porsche's automotive business that it doesn't already own for 4.46 billion euros ($5.6 billion), ending a seven-year takeover saga that divided two of the most powerful families in Germany.
VW was able to proceed with the transaction two years earlier than planned after reaching an agreement with German tax authorities, it said late Wednesday. The cash deal is based on an equity value of 3.88 billion euros and also includes what the Porsche holding company would have received in dividend payments and half of the forecast synergies from the combination.
The agreement means Wolfsburg, Germany-based VW can now fully fold the Porsche automaking business into its stable of 12 brands, which range from Audi luxury sedans to Ducati motorbikes. The purchase helps VW chief executive officer Martin Winterkorn in his quest to pass Toyota and General Motors and become the world's largest automaker by 2018.
"It's very positive for VW as they get 50 per cent of an asset they value at 26 billion euros on their own books for 4.46 billion euros," said Erich Hauser, a Credit Suisse analyst in London. "If I was a Porsche shareholder, I'd feel slightly shortchanged, though."
VW shares have climbed 17 per cent this year, valuing the carmaker at 60.7 billion euros. The Porsche holding company's stock fell as much as one per cent, giving it a market value of 12.8 billion euros.
The firms agreed to combine in 2009 after Stuttgart-based Porsche racked up more than 10 billion euros in debt in an unsuccessful attempt to take over VW, Europe's largest carmaker. VW said it expects Porsche's automaking business, which it values at more than 20 billion euros, to be fully consolidated in its accounts from Aug. 1.
"Porsche and Volkswagen belong together," Winterkorn said Thursday at VW headquarters. "By working with one another we will raise the company to a new level. We are on the way to being No. 1."
Porsche's earnings contribution for this year will be mainly offset by the purchase price, VW said. By revaluing its existing shares in Porsche, VW expects to book a non-cash gain of more than nine billion euros and predicts a liquidity drain on its own automaking division of about seven billion euros. The agreement will result in 320 million euros in additional synergies due to the earlier completion.
Volkswagen is paying the purchase price, plus transferring one share to Porsche, allowing the carmaker to classify the merger as a restructuring rather than a takeover and avoiding a possible tax bill on the purchase of about one billion euros that it might have had to pay by completing the merger before 2014. The agreement with tax authorities has been criticized by some German politicians.
VW will now pay "well over" 100 million euros in transaction taxes on this deal, chief financial officer Hans Dieter Poetsch told reporters at the press conference.
The agreement simplifies the cross-shareholdings between the companies by leaving the Porsche SE holding company as the largest stakeholder in VW, with 50.7 per cent of the common stock, and at the same time folding the Porsche automaking operations fully into the VW group. The holding company plans to use proceeds of about 2.4 billion euros from the sale to invest in materials for the auto industry, real estate and energy trading.
-- Bloomberg News
Republished from the Winnipeg Free Press print edition July 6, 2012 B11
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