Porsche and Volkswagen: Who's Buying Whom?
July 13, 2009
By Bill Visnic
For those who thought the mostly business - but partly familial - control struggle between the Volkswagen Group and Porsche AG couldn't get any weirder or more complicated, it has.
Porsche, strangled with debt incurred in trying to acquire more than 75 percent of VW, reportedly was negotiating a non-binding agreement with the Qatar Investment Authority that would not only see the Middle Eastern investors gain as much as 25 percent of Porsche but also be granted options to buy as much as 20 percent of VW.
The situation's increasingly circus-like atmosphere was bolstered by Porsche's rejection of a VW offer to buy half of the tiny sportscar maker for a reported $5.6 billion - a refusal that came with a petulant admonishment that VW's offer went to Porsche chairman Wolfgang Porsche instead of the company's executive board.
The two German automakers have been locked in a years-long battle to decide whether tiny sportscar maker Porsche AG or giant Volkswagen Group will control the other. The Porsche family, in unsuccessfully attempting to take over VW, also riled Ferdinand Piech, the immensely gifted engineer and notoriously prickly current chairman of VW. Piech also is related to the Porsche family and is one of Porsche's chief family shareholders.
Porsche reputedly racked up more than $12 billion in debt in its run to control as much as 75 percent of VW stock; Porsche currently owns a controlling 51 percent and options to acquire much more. It is those options Qatar Investment seemingly seeks to own as part of its proposed investment in Porsche.
Earlier this year, it seemed Porsche and VW would do the businesslike thing, bury the hatchet and merge. But a concrete merger deal never emerged and the bickering between the companies and families intensified. Now VW questions whether the Qatar proposal for Porsche investment -one that brings no voting rights - is nothing more than a backdoor method of acquiring a large stake in VW.
Middle Eastern investors have turned up the interest in the German auto sector in recent months. In addition to the latest Porsche-VW maneuvers, in March an Abu Dhabi investment firm, Aabar Investments PJSC, spent almost $3 billion to obtain 9.1 percent of Daimler AG, owner of the Mercedes-Benz brand. The stake made Aabar Daimler's largest shareholder.
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