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Porsche Makes a Bid for the Rest of Volkswagen

From nytimes | March 30,2007

Porsche made a bid for Volkswagen that values the carmaker at 35.8 billion euros ($47.7 billion), a low offer aimed at leaving Porsche with a controlling stake rather than full ownership.

Porsche, maker of the Cayenne, raised its stake in Volkswagen to 30.94 percent Monday, putting itself under legal obligation to bid for the rest of the shares. The company is offering 100.92 euros ($137.03) for each common share and 65.45 euros ($87.13) for each preferred share, it said in a statement.

A bid helps block rival offers while a European court considers invalidating a German law that prevents a Volkswagen takeover. Volkswagen’s chairman, Ferdinand Pi?ch, whose family controls Porsche, has increased his dominance since Porsche first bought a stake in 2005, installing Porsche executives on the board and forcing out the chief executive at Porsche’s largest supplier.

“With just shy of one-third of the company under Porsche control, it is an effective corporate coup d’état,” said Stephen Pope, an analyst at Cantor Fitzgerald in London. “This will secure the flow of parts supply to Porsche and allow Ferdinand Pi?ch to further fashion VW into his desired form.”

The bid by Porsche for the common and preferred shares is 16 percent below Volkswagen’s market value of 42.7 billion euros ($56.8 billion) last Friday, the day before Porsche announced its plan.

Porsche will send the official offer to shareholders in the next few weeks, said a spokesman, Frank Gaube. The company has to announce the size of its holding in Volkswagen again only once, when it exceeds 50 percent.

The benefit of bidding now for all of Volkswagen is that it frees Porsche to make future stake purchases as it sees fit. Having made the minimum legal bid to all shareholders, Porsche is no longer required by law to present further purchase offers to all stakeholders.

“This is a bit of a defensive move,” said Eric-Alain Michelis, an automobile analyst at Société Générale. “They were afraid that some financial institutions could take big stakes in the company and force them, Porsche, to launch an offer at a much higher price.”

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