Porsche 'tail' wags VW

Specialist sportscar maker Porsche could soon emerge with control of one of the world's biggest automotive and trucking conglomerates -- Volkswagen.

The world's most profitable carmaker, Porsche, has been steadily acquiring stock in the German giant (which also owns Audi, Bentley, Lamborghini, Seat and Skoda and large shareholdings in a number of key truck brands) since last August. Initially it stated it was securing the shreholding to protect its interests in shared vehicle development and architecture. Now it seems there may be a longer term strategy -- potentially the re-privatisation of the entities under the control of family that originally started the brands.

Headed by CEO Wendelin Wiedeking (pictured), Porsche's most recent move is to increase its stake in Volkswagen AG from its present 27.3 per cent holding to up to 31 per cent of ordinary shares. As this exceeds the 30 per cent ownership level that trips a mandatory takeover offer under German law, Porsche is set to move to make such an offer for the automotive giant.

Statements by the brand suggests that the mandatory offer will be made to all VW shareholders after the 30 per cent voting rights threshold is exceeded. Once this mandatory offer has been implemented, any further increases in shareholding will not trigger a renewed obligation by Porsche to make offers to the remaining shareholders of VW.

Financing of the mandatory offer has been underwritten via a credit facility arranged by ABN AMRO Bank NV, Barclays Capital, Merrill Lynch International, UBS Limited and Commerzbank AG.

Because Porsche's renewed interest in VW continues to generate higher share prices, it appears the sportscar brand's offer may be a case of drawing a line in the sand -- defining a level it's willing to play and beyond which the share price will likely be being driven more by Porsche's own interest than any increase in the value of VW.

Porsche's share price offer is yet to be locked in. It is expected to be 100.92 Euro for each VW share -- slightly lower than recent market prices, but a whopping 100 per cent higher when Porsche first acquired a stake in VW last year. The minimum price will ultimately be calculated by the German Federal Agency for Financial Services Supervision (BaFin) but Porsche is already stating that it does not consider that any premium on the minimum price would be appropriate.

Should the offer succeed, Porsche has made it clear that it will keep the brands separate and nothing will change with regard to the structure of VW's plants, suppliers, production and development partners, dealers and any other key partners.

"The existing business and legal relationships will remain unaffected by the transaction," the company claims.

"As a result of the hive-down, the areas of responsibility of the management will in future be divided between the holding activities on the one hand and the development, production and sale of premium sports vehicles in Dr Ing hc F Porsche AG on the other."

Check out CN Confidential tomorrow for more background on the Porsche-VW takeover

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