VW said to be close to deal on acquiring remaining Porsche stake
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BERLIN/FRANKFURT – Volkswagen is closing in on a deal to purchase the remaining 50.1 percent stake in Porsche SE's automotive business that it does not already own, people familiar with the matter said.
Approval from German tax authorities is one of the hurdles to an agreement, which VW and Porsche are still negotiating, the people said, declining to be identified discussing private talks.
VW may announce the plan within the next two weeks, the people added.
The automaker is considering setting up an umbrella company to purchase the stake, according to one of the people.
VW has considered alternatives to a 2009 agreement, which called for a full merger by the end of 2011, after lawsuits against Porsche in the United States and Germany complicated the company's valuation.
The plan currently under consideration would allow VW to fully integrate Porsche's carmaking business, of which it already owns 49.9 percent, while leaving the listed Porsche holding company to take legal responsibility for the outcome of the suits.
VW's supervisory board is meeting Monday and will discuss the deal, one of the people said. An announcement of the agreement is not expected on Monday, the person added.
"VW is working on creating an integrated automobile company with Porsche under commercially sensible conditions and as quickly as possible," said Marco Dalan, a spokesman for VW, declining further comment. Wolfgang Glabus, a Porsche spokesman in Stuttgart, said the company is continuing to work toward an agreement.
Exercising options
VW's main alternative to the original merger agreement has been to exercise options to acquire the remaining 50.1 percent stake in Porsche's automaking business for 3.9 billion euros ($5.2 billion), leaving Porsche as the holding company for the 50.7 percent of Volkswagen's common stock that it owns.
VW cannot exercise the options until Nov. 15, 2012, when they would trigger a tax bill of an estimated 1 billion euros, overwhelming potential savings from the deal. The taxes would shrink to zero if the carmaker waits until the second half of 2014 before exercising the options, the company has said.
But VW will avoid having to pay the huge tax bill if it completes the purchase before 2014 by setting up the holding company to temporarily take control of the stake, German magazine Der Spiegel reported last month, citing unidentified VW managers.
Volkswagen has said that the combination with Porsche will boost profitability and save 700 million euros.
Legal wrangles
The two companies had worked on a full-blown merger since 2009, when Porsche failed in a hostile attempt to take over VW, the sports-car maker's biggest supplier. Porsche racked up more than 10 billion euros of debt as it purchased the majority of VW's common shares.
Short sellers of VW stock sued Porsche in the United States, claiming it secretly piled up VW shares and later caused the investors to lose more than $1 billion. Claimants in Germany have also sought damages, while prosecutors in Stuttgart, where Porsche is based, are investigating suspicions that the sports car maker didn't adequately inform investors about its plan to take control of VW. Porsche has repeatedly denied all allegations of wrongdoing.
Source: Bloomberg
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