--Porsche to join VW's stable of brands
--Companies to benefit from more cost savings faster
--VW labor chief dismisses concerns over tax bill
(Adds detail, comments throughout, starting in the third
paragraph)
By Christoph Rauwald
FRANKFURT--Volkswagen AG (VLKAY, VOW.XE) said Wednesday it will
take over in August the remaining 50.1% stake in Porsche Automobil
Holding SE's (POAHY, PAH3.XE) sportscar unit it doesn't already own
for 4.46 billion euros in cash plus one common share, as the two
German auto makers hammered out an accelerated deal to reap more
cost synergies faster.
"The unique Porsche brand will now become an integral part of
the Volkswagen Group--that is good for Volkswagen, good for Porsche
and good for Germany as an industrial location," Volkswagen Chief
Executive Martin Winterkorn said in a statement.
The final agreement to add Porsche to Volkswagen's stable of 10
car and truck brands draws a line under one of the most spectacular
takeover bids in the European car industry in recent years, which
eventually backfired badly.
Porsche initially acquired a minority stake in Volkswagen to
benefit from better economies of scale, but then bypassed
disclosure rules through a complex set of stock options to acquire
additional voting stock in Volkswagen. When Porsche revealed in
October 2008 that it had direct and indirect access to almost 75%
of Volkswagen's voting stock, VW's common stock skyrocketed above
EUR1,000 per share and temporarily made the Wolfsburg, Germany,
firm the world's most valuable company.
Mr. Winterkorn also became CEO of Porsche's holding company
after Porsche's ill-fated attempt to take over the much larger
Volkswagen finally collapsed in 2009. After a fierce power struggle
that raged for more than two years, Porsche had to finally agreed
to a deal under Volkswagen's leadership as its debt ballooned in
the wake of the financial crisis.
Volkswagen, Europe's largest auto maker by sales volume, agreed
at the time to pay EUR3.9 billion for a 49.9% stake in Porsche's
sportscar business as part of a complex deal to bail out the
holding company. Volkswagen and Porsche also granted each other
options to integrate the remaining 50.1% into Volkswagen at a later
stage, if a full-fledged merger including Porsche's holding company
failed to be finalized by the end of 2011. The two companies had to
abandon the plan last year due to legal obstacles. Porsche's
holding firm, however, still holds a 50.7% voting stake in
Volkswagen. But it will remain a separate entity for the time being
amid several pending lawsuits that allege Porsche of cornering the
market during its attempt to take over Volkswagen.
"Combining their operating businesses will make Volkswagen and
Porsche even stronger--both financially and strategically,"
Winterkorn said.
"We can now cooperate even more closely and jointly leverage new
growth opportunities in the high-margin premium segment," he
said.
Porsche's sportscar unit, which sells the iconic 911 sportscar,
the Cayenne sport-utility vehicle, the Panamera four-door coupe and
the Boxter/Cayman models, is one of the world's most profitable
auto makers.
Volkswagen said the cash component of Wednesday's deal is based
on the equity value of EUR3.9 billion for the remaining shares in
Porsche's sportscar business as agreed in 2009 plus additional
items including anticipated dividend payments and Porsche's share
in the expected cost synergies that can now be reaped faster. It
said the net cost synergies through the accelerated deal are worth
around EUR320 million.
Porsche said it will use the EUR4.46 billion in cash to repay
bank liabilities of EUR2 billion, in line with previous statements.
The remaining money is supposed to be used for strategic
investments in automotive assets after Porsche changed its
corporate statutes accordingly last month.
"The accelerated implementation of the shared goal will make
Porsche SE a financially strong holding company," Porsche brand
chief and management board member of Porsche's holding firm,
Matthias Mueller, said in a statement.
Both Volkswagen's and Porsche's labor unions said they support
the deal as it creates transparency for both companies and improves
cooperation.
Volkswagen's labor chief, Bernd Osterloh, dismissed concerns
voiced by German politicians in recent weeks that the accelerated
deal including the transfer of one voting share means the companies
avoid a large tax payment of more than EUR1 billion. Through the
share transfer, the deal is viewed by tax authorities as a
corporate reorganization instead of an outright sale.
"The deal agreed now leads to a tax payment of more than EUR100
million," Osterloh said. He said a deal for an outright sale before
2014, which would have triggered a much larger tax bill, wouldn't
have been approved by the boards.
Mr. Winterkorn and Chief Financial Officer Hans Dieter Poetsch
told Porsche shareholders last month that a faster integration of
Porsche's sportscar unit into Volkswagen would improve earnings,
which in turn would lead to higher tax payments.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com