Porsche Ups its VW Stake; Piech Firmly in Control
March 26, 2007

Porsche confirmed today it has exercised an option to take an extra 3.6-percent voting stake in Volkswagen, raising its holding to 30.9 percent. That puts Ferdinand Piech firmly in control, and blocks unwanted suitors, like hedge funds and buyout firms.

German law requires Porsche make a takeover bid to other VW shareholders if it raises its stake past 30 percent. To that end, Porsche said Saturday it expected to offer 100.92 Euros per VW ordinary share plus the legal minimum for VW preference shares. By offering investors the minimum amount required, Porsche gets a great deal. It gets a huge discount on Friday’s closing price of 117.70 Euros and crosses the 30-percent milestone cheap and cannot be forced to launch a bid again.

In a statement issued over the weekend, Porsche said it was “firmly convinced that a closer bond with VW through an increase of the stake to more than 30 percent of the Volkswagen ordinary shares will produce benefits for both partners without diluting or indeed endangering the identity of Porsche." A Porsche spokesman insisted the company does not want to own a majority of VW.

The announcement caps months of speculation that a bid was imminent, driving VW stock up by more than a third this year to record highs. It also cements Ferdinand Piech’s control over VW as well as Porsche, in which he owns a principal stake.

Now the question is what will Piech’s control mean. Can he and the lieutenants, led by former Porsche CEO Wendelin Wiedeking who now heads VW, make VW as profitable as Porsche. Can he turn around the VW brand and make the necessary cuts? Will he make costly mistakes like he did in his previous tenure at VW with such things as the purchase of Lamborghini and Bugatti and the development of the VW Phaeton luxury car.

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