Porsche: Banking Consortium Agrees To Underwrite New Stock

Porsche Automobil Holding SE (PAH3.XE) said Friday that a banking consortium offered to underwrite all new ordinary and preferred stock at a subscription price of 38 euros ($53.54) per new share.

The offer is part of the German sports car maker's EUR5 billion capital increase to cut debt ahead of the planned merger with Volkswagen AG (VOW.XE).

In a statement, Porsche said the new shares will be offered through indirect subscription rights. Porsche said its owner families Porsche and Piech, who control 90% of the company's voting stock, as well as the emirate of Qatar, who holds the remaining 10% of the company's ordinary shares, aim to exercise their subscription rights.

Porsche shareholders can only subscribe to new shares of the class they already own. Porsche's ordinary shares carry voting rights, but its preferred stock doesn't.

Porsche said its boards will decide March 27 about the subscription price and further details of the planned capital increase.

Last week, Porsche said it is sticking to its plan to raise EUR5 billion by May 31 through a capital increase to cut its net debt, which stood at EUR6.34 billion at the end of last year, despite increased volatility on financial markets following the nuclear crisis in Japan.

"We are very optimistic that we will succeed in persuading our shareholders to subscribe," Martin Winterkorn, the chief executive of both Porsche and Volkswagen, told reporters at the time.

Hans Dieter Poetsch, chief financial officer of Porsche and Volkswagen, said the market environment for the capital increase could be better, but voiced optimism that the deal will succeed nevertheless due to "the great quality of the underlying assets."

Cutting debt is a crucial step for Porsche ahead of the planned merger with Europe's largest automaker by sales.

Poetsch last week described the EUR700 million cost synergy potential as a "conservative estimate" and reiterated that the full synergies can only be realized if Porsche's core sportscar business "operates under one roof," either through an integration into Volkswagen or a merger between Volkswagen and Porsche's holding firm.

The prospects of the merger were thrown into doubt last month when Porsche announced that the deal would be less likely if the related legal and tax issues were to drag on longer than expected. Investigations into alleged market manipulations by prosecutors in Germany and a similar lawsuit in the U.S. are ongoing and unlikely to be finalized by the end of this year.

Volkswagen bought a 49.9% stake in Porsche's core sports car unit at the end of 2009 and holds options to acquire the remaining 50.1% between Nov. 15, 2012, and Jan. 31, 2015. But Porsche's holding firm could remain a separate entity until all tax and legal issues are resolved.

Porsche wants to use the proceeds from the capital increase to repay tranche A of the existing syndicated EUR2.5 billion loan, which is due June 30.

Porsche initially tried to take over the wheel at much-larger Volkswagen, but the bold move backfired when credit markets turned anemic and debt ballooned. The Stuttgart-based firm had to agree to a merger under VW's leadership.

According to previous statements, Porsche plans to raise EUR2.5 billion through new common shares and EUR2.5 billion through new preferred shares.

-By Christoph Rauwald, Dow Jones Newswires; +496929725512; christoph.rauwald@dowjones.com

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