Porsche Automobil Holding SE and Volkswagen AG will take another step toward uniting Thursday, when they are expected to announce the framework of a deal that would raise much-needed cash for Porsche and ultimately fold it into VW, people familiar with the matter said.
The supervisory boards of the German auto makers are expected to vote Thursday morning on a so-called memorandum of understanding, which would be a precursor to a more detailed and firm merger agreement, one of the people said.
As part of the deal, a state-backed Qatari investment fund is expected to lend Porsche's holding company €250 million ($354 million), about a third of what it earlier had planned, one person said. Qatar also may buy a larger-than-expected 10% stake in Porsche's holding company, which has a market value of €7.7 billion, this person said.
Porsche was forced into VW's arms when its bold attempt to buy its much larger rival backfired. Porsche had bought a roughly 50% stake in VW, Europe's largest car maker, and secured options on another 20%. But the roughly €10 billion in debt it accumulated in the process ultimately proved too much to bear.
Amid slumping auto demand, Porsche is trying to raise funds to pay off the debt, which is set to cost the storied company its independence.
As part of the complicated deal, which would ultimately merge both the Porsche holding company and its auto unit into VW, Porsche and VW likely will raise fresh capital, one of the people said. It is unclear how big the capital increases will be, but late last month Porsche said it could sell new shares worth roughly €5 billion.
To maintain their stake in the sports car maker, the Porsche and Piech families plan to sell an auto distribution business in Austria to VW for more than €3 billion, one of the people said. Qatar also is expected to buy a 17% stake in VW through the options Porsche accumulated, which are valued at as much as €5 billion.
The terms could still change and there is no guarantee the boards will approve the deal.
