Just a few days ago, the car giant Volkswagen announced to sign off on a takeover agreement with Porsche, buying thus the remaining shares in Porsche for no more no less than €4.46bn. Back in December 2009, Volkswagen bought 49.9% of the sports car business and the company will now pick up the remaining 50.1% in cash plus one VW common share.
In 2009, the two car groups agreed to merge by 2011 after Porsche accumulated more than €10 bn of debt trying to take over VW. Legal risks and obstacles have postponed the combination of the two car groups that was to be finalized in September, 2011.
Plans to speed up this integration have been finalized on Wednesday with the transaction being classified as a restructuring of the company and not as a takeover otherwise VW would have had to pay a €1bn tax bill for buying the remaining half of Porsche it doesn’t currently own. The tax-avoidance move has been criticized by German politicians though, but Martin Winterkorn, VW chief executive said that this integration would be good not only for VW and Porsche but also for Germany as an industrial location.
The integration will take effect from August 1, two years earlier than originally planned. This way, Porsche will join the VW stable that includes Audi and Ducati motorbikes as well as luxurious Bentley and Bugatti among others.
Hans Dieter-Pötsch, VW chief financial officer said that this integration would allow the two car groups to “concentrate fully on their operating business by making day-to-day co-operation much simpler” adding that “the accelerated integration will allow us to start implementing a joint strategy for Porsche’s automotive business more quickly and to realize key joint projects more rapidly.”
VW will thus pay the Porsche holding company €4.46bn and one VW common share for the 50.1 per cent of Porsche’s carmaking operations VW doesn’t own yet. By revaluing VW’s existing shares in Porsche, the company expects to benefit from a more than €9bn non-cash gain. However, VW’s €15.8bn cash pile will be reduced by €7bn as the company will have to consolidate Porsche’s negative net liquidity of €2.5bn in addition to the cash payment to Porsche.