Porsche wins dismissal of hedge funds' suit over failed VW bid

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BERLIN (Bloomberg) -- Porsche Automobil Holding SE won the dismissal of a lawsuit seeking 1.4 billion euros ($1.95 billion) over the German carmaker's aborted takeover of Volkswagen.

The lawsuit, filed by 23 hedge funds including Viking Global Equities LP, Glenhill Capital LP and David Einhorn’s Greenlight Capital Inc., was thrown out by judges in Stuttgart today. T

The court is the second in Germany to rule in Porsche’s favor over the issue, in which different groups of investors are seeking a total of 5 billion euros in courts around the country. Two smaller cases were dismissed in Braunschweig in 2012.

In the cases investors claim that Porsche misled them over their intention to bid for VW more than five years ago. VW Chairman Ferdinand Piech and Porsche Chairman Wolfgang Porsche have also been sued over the deal in Frankfurt.

Porsche has faced a series of investigations and lawsuits since disclosing in October 2008 that it controlled 74.1 percent of Volkswagen, partly through options, and was seeking to acquire 75 percent as part of a takeover strategy. The announcement caused Volkswagen's stock to jump as short sellers raced to buy shares to repay borrowed stock in bets that VW would fall.

"We didn’t have to take evidence on whether Porsche already planned in February 2008 to take over VW," Presiding Judge Carola Wittig said at a hearing today. "Even if that was the case, Porsche wouldn’t be liable under the rules of civil law."

The hedge funds claim that Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen.

Porsche spokesman Albrecht Bamler said the ruling was an important victory for the company that indicates how the other suit still pending may fare. Matthias Wuehler, a lawyer for the hedge funds, declined to comment.

The hedge funds argue Porsche lied in a March 10, 2008, press release. They also say Porsche’s head of investor relations, Frank Gaube, misled shareholders in phone calls when he denied the company sought a takeover.

No ‘guarantee’

Judge Wittig said not every piece of “misinformation” by a market participant entitles a plaintiff to collect damages. Porsche didn’t have to disclose its intentions and the release only described the status on a given day, she said.

"There was never a guarantee that Porsche wouldn’t change its mind and decide the next day to do the takeover," Wittig said.

Porsche’s release commented on Volkswagen and wasn’t informing its own shareholders about its own stock for which the rules are much stricter, according to the judge.

The funds didn’t show they actually invested because of the information in the March press release, she said. The amount of the damage claimed was due to the plaintiffs’ decision to engage in "highly speculative and naked short selling," she said.

Most of the civil litigation against Porsche is pending in the Regional Court of Braunschweig, which has hearings scheduled for April 30, May 14 and May 21.

Viking, Glenhill and Greenlight were among funds that sued Porsche in New York state court over the carmaker’s options strategy. In early 2013, the hedge funds agreed not to pursue further appeals in New York and Porsche granted them a 90-day period to sue in Germany instead, leading to the Stuttgart case.

Today’s case is: LG Stuttgart, 28 O 183/13.

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