VW vs Porsche

Volkswagen has finalized its control over Porsche. The Wolfsburg based carmaker agreed to buy the 50.1 percent stake in Porsche’s automotive business it doesn’t already, which marks the end of an interesting albeit complex and turbulent history.

The history between the two companies goes way back. Porsche always had a close relationship with VW. For example, the first Volkswagen Beetle was designed by Ferdinand Porsche. The Porsche 924 was originally intended to be Volkswagen’s flagship coupé. Other examples for these kind of collaborations are VW-Porsche 914 and 916, Audi RS2, or the VW Touareg, Audi Q7 and the Porsche Cayenne which are built on the same platform.

The familiarity between Volkswagen Aktiengesellschaft and Porsche Automobil Holding SE even deeper as Porsche is being owned by the Piëch and the Porsche families. The current chairman and former CEO of the Volkswagen Group is Dr. Ferdinand Karl Piëch, a grandson of Ferdinand Porsche who started his career at Porsche before moving to Audi.

VW’s takeover this week is a remarkable reversal of roles as Porsche had been trying to take over VW for many years ‒ a company 15 times the size of Porsche ‒ in which the Stuttgart based company overstretched itself. Porsche’s unsuccessful attempt resulted more than € 10 billion ($13.8 billion). To make matters worse Porsche was also confronted with charges of market manipulation.

In an ironic twist, Europe’s biggest carmaker became interested in buying the highly indebted Porsche. Both companies had agreed in 2009 to merge by the end of 2011, but the merger was delayed due to an investigation in the Germany and lawsuits in the US. Porsche reckons these issues will persist for a while. Therefore the transaction structure make sure that the risks for the lawsuits are clearly on the Porsche SE side.

With the legal hurdles cleared (at least for VW), both companies announced this week that they are to create the integrated automotive group through the contribution in full of Porsche’s automotive business to the Volkswagen Group, with the move expected to already take effect as of August 1, 2012.

Volkswagen-Porsche structure before the transaction:
Volkswagen-Porsche financial structure before the transaction

Volkswagen-Porsche structure after the transaction:
Volkswagen-Porsche financial structure after the transaction

Volkswagen will pay €4.46 billion ($5.6 billion), plus one VW share for the remaining 50.1%. This one ordinary share makes quite a different as it will save VW an additional tax bill of more than €900 million ($1.1 billion). The share payment allowed VW to classify the deal as a restructuring rather than a takeover, a tax-saving plan approved by German tax authorities.

This restructuring maneuver was applauded by legal and banking advisers, but it has annoyed some politicians who pointed out that “many skilled workers can only dream of so much charity from the tax offices.” Perhaps this is why Dr. Martin Winterkorn, Chairman of the Board of Management for Volkswagen emphasized the merger is “good for Volkswagen, good for Porsche and good for Germany as an industrial location”.

Political discussions aside, the integration of Porsche, which just experienced the most successful financial year in its history, into the VW group will help Volkswagen to fulfill its ambition to become the world’s largest automaker by 2018. The Group is currently the world’s second-largest motor vehicle manufacturer and already includes marques such as Audi, Bentley, Bugatti, Lamborghini, SEAT, and Škoda. Furthermore truck builders Scania and MAN, as well as motorcycle manufacturer Ducati are also part of the VW family.

[Via Bloomberg]

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