FRANKFURT (Bloomberg) -- Porsche AG will probably succeed in convincing preferred shareholders to support a 5 billion-euro ($6.9 billion) stock sale because the deal may offer the chance to buy into Volkswagen AG at a discount, investors said.
Porsche says the proposed share sale is a “key precondition” for a merger with VW by helping the sports-car maker reduce debt.
Porsche aims to complete the capital increase by May 30, 2011, CFO Hans Dieter Poetsch said.
The deadline would be extended until Aug. 30 should U.S. lawsuits against the carmaker result in a delay.
“Porsche SE's liabilities will be reduced considerably through the capital increase,” Poetsch said. “Porsche believes it's well on its way to set new records in terms of unit sales, revenue and profits in the medium term.”
Porsche's shareholders were voting today at an extraordinary meeting on whether to approve raising the funds, half of which would come from the Porsche and Piech families, who control the common shares.
The proposal needs the approval of 75 percent of both common and preferred shareholders present at the meeting in order to pass.
Porsche is in the process of merging with Volkswagen, Europe's largest carmaker. Porsche's preferred shares have risen 28 percent this year, while Volkswagen's preferred stock has surged 90 percent.
“Porsche preferred shares are the cheapest way to get a slice of a joint company,” said Juergen Meyer, who oversees about 1 billion euros at SEB Asset Management in Frankfurt, including more than 1.4 million Porsche shares. “If Porsche doesn't get the money, they'd have to sell their extremely profitable car business or their holdings in VW, and that can't be in the interest of its investors.”
The sports-car maker needs the money to help pay back a 2.5 billion-euro bank loan expiring on June 30.
Porscheand VW agreed to merge in August 2009 after Porsche racked up more than 10 billion euros of debt in an unsuccessful attempt to gain control of VW. Volkswagen now holds 49.9 percent of Porsche's car-making operations.
“I don't think the families will have any problem getting the level of acceptance that they want,” said Pierre-Alexis Dumont, a fund manager at OFI Asset Management in Paris, which oversees about $1.23 billion in stocks, including about 380,000 Porsche shares. “Most people who are invested in Porsche right now knew there'd be a share offering. They're most interested in the value creation from the merger with Volkswagen and the end of the discount of their holdings.”
The combination, scheduled for completion in the second half of 2011, may stall until the resolution of tax-related issues in Germany and U.S. lawsuits, VW CEO Martin Winterkorn, who also runs Porsche's holding company, said last month.
U.S.-based short sellers of VW stock have sued Porsche, claiming the carmaker secretly piled up VW shares and later caused them to lose more than $1 billion. A U.S. court will determine in January whether the case may proceed.
“I'm not going to touch the shares again until the uncertainties regarding the capital increase and the lawsuits have been dispelled,” said Stephan Thomas, a fund manager at Frankfurt Trust, which manages about 16 billion euros. “The holders of preferred shares are being made to pay for the integration process.”
Broad approval will depend on a fair price for the offering and the extent to which it will enable Porsche to repay debt, said Dumont, adding that a price between 45 euros and 55 euros would be justified, depending on the outcome of U.S. litigation. That would be as much as 24 percent less than Porsche's share price yesterday.
“It doesn't help shareholders if it's done at a sharp discount to the intrinsic value of the business,” he said.