Porsche family seeks redemption with IPO after tearful defeat

More than a decade after the billionaire Porsche clan waved goodbye to their crown jewel, the family is set to claw back more direct influence over the sports-car maker as parent Volkswagen Group pushes ahead with one of Europe’s biggest initial public offerings.

The share sale, targeted to value Porsche at as much as 85 billion euros ($84 billion) -- roughly the same as its parent -- could deliver about 10.6 billion euros in proceeds to VW.

The Porsche family, still led by some of the personalities who lost control of the iconic automaker back in 2009 following a takeover attempt of VW that went wrong, will emerge with a blocking minority.

It’s a comeback of sorts for the Porsche heirs left badly bruised following the sports-car maker’s audacious bid to swallow its much bigger rival.

The two companies share a common history, both in terms of engineering heritage and the founding families.

Wolfgang Porsche, who remains the doyen of the family, is the cousin of the late Ferdinand Piech, a longtime VW executive who built the automaker into the multi-brand behemoth it is today.

The Porsche and Piech family’s stake in their namesake holding company is worth about $10.5 billion, and they have received at least $2.9 billion within the past decade through dividends, according to the Bloomberg Billionaires Index.

Back in 2005, Porsche set out to quietly acquire shares in VW, a company at the time 15 times its size, with a plan to eventually gain complete control. But as the financial crisis devastated markets worldwide, Porsche Holding in 2009 was forced to abandon the bid, and VW turned around and swallowed Porsche.

The prolonged battle culminated in a staff meeting in the pouring rain in July 2009, where Porsche management and family owners conceded defeat.

In a teary-eyed speech, Wolfgang Porsche nevertheless remained steadfast, vowing that “the Porsche legend lives and will never perish.”

What followed was a complex deal whereby Porsche then gradually integrated into VW’s sprawling stable of brands alongside Audi, Lamborghini and Bentley. The family emerged as anchor shareholder in the parent company.

The family’s heritage harks back to Wolfgang Porsche’s grandfather, Ferdinand Porsche, who created the VW car that later became the Beetle.

Ferdinand Porsche’s son Ferry Porsche established the sports-car operations. The first vehicle to bear the Porsche name was registered in 1948, which was the 356 “No. 1” Roadster.

The clan today counts several dozen descendants, though few play an active role in the business, dabbling instead in careers ranging from medicine to film to e-commerce. Many live in Austria in the Alpine region of Zell am See, where Wolfgang Porsche likes to retreat to the Schuettgut hunting lodge and family members cruise along the winding roads in vintage cars.

Complex governance

Spinouts of sports-car brands have worked for other members of the world’s ultra-wealthy.

Ferrari’s stock has surged about 265 percent since the automaker listed on the New York Stock Exchange, giving Piero Ferrari -- son of the company’s founder, Enzo, a net worth today of roughly $4.1 billion, according to Bloomberg’s wealth index.

“Having relinquished control in the past, you now have the next generation of family members coming through who have previously cut their teeth in different parts of VW’s empire and see huge potential for unlocking shareholder value via a Porsche AG IPO,” said Michael Dean, senior European autos analyst at Bloomberg Intelligence.“You have to remember this is effectively a family business,” Dean said.

Convoluted structure

The listed Porsche will have a dual share structure similar to VW with voting and non-voting shares. Porsche’s planned small free float and limited managerial independence -- Porsche head Oliver Blume will carry on as CEO of VW -- has triggered governance concerns similar to criticism leveled at VW’s convoluted structure.

VW is selling 12.5 percent of total share capital, split into 25 percent of non-voting preference stock offered to outside investors, and 25 percent plus one share of common shares to Porsche SE.

For the family company to fund the multi-billion-euro purchase, VW will pay out a special dividend.

The new setup will give the family the power to veto major strategic decisions at Porsche; since the takeover by VW, the brand has sometimes had to go along with moves that ended up being against its interests, such as a plan to build EVs with Audi at a plant in Hanover.

Still, the two companies will remain closely linked to one another -- and to the German state of Lower Saxony, another major VW shareholder and home to VW’s largest factory.

“It’s proceeding in the typical VW way: Real independence is nowhere in sight,” said Ingo Speich, who heads sustainability and corporate governance at Deka Investment. “The aim is for the owning family to buy ordinary shares in Porsche and continue to call the shots.”