VW/Porsche

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Stand by for more financial engineering involving the German company once mainly known for its sports cars. The road ahead for Porsche, now with almost 51 per cent of Volkswagen, was supposed to be to raise its stake to 75 per cent, then launch a domination agreement enabling it to use VW’s €10.7bn cash pile to fund the deal. But obstacles block Porsche’s way. There is no guarantee it can overturn the law allowing the German state of Lower Saxony to exercise a blocking minority via its 20.1 per cent VW stake. More pressingly, Porsche’s debt has ballooned to €9bn. Taking on even more to fulfil its ambitions could lead to a high-speed blow-out.

Still, there is always more than one way to get somewhere – as VW has spotted. VW could use its cash instead to buy Porsche AG, the sports car subsidiary that is wholly owned by holding company Porsche SE. Hey presto! Porsche SE, controlled by the Porsche and Piëch families, would then become pretty much debt-free. At the same time, it would keep its stake in VW, which would become an automotive powerhouse spanning the VW, Audi and Bentley marques – and also Porsche itself.

Porsche calls the idea “nonsense”. But it makes a lot of industrial and financial sense for Porsche’s controlling families. They would be paid full value by VW for their sports car subsidiary, worth some €7bn-€9bn. Yet they would retain control of the company through their 51 per cent stake in VW. In effect, VW would have transferred some €3.5bn-€4.5bn of value to them, to the detriment of its minority investors.

There are also clear attractions for VW’s chairman, Ferdinand Piëch, whose grandfather founded Porsche and designed the VW Beetle. Such a deal would enable him to reunite the family heritage and put him in the driving seat at Porsche, of which he owns 13 per cent. Lower Saxony might just support a transaction that would see Porsche cars bolster VW’s already considerable clout. Although the route might have been long and winding, the result, as VW already calls its Porsche tie-up, would be a “centre of power” in global autos.

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