The Wall Street Journal (Detroit) - Volkswagen AG Chief Executive Martin Winterkorn on Monday said the planned merger with Porsche Automobil Holding SE "isn't possible" in the foreseeable future because of swirling legal issues, so the German auto maker may instead buy out the Stuttgart-based firm's core sports-car unit.
"We want to work together as soon as possible," Mr. Winterkorn told reporters at the sidelines of the North American International Auto Show.
Mr. Winterkorn is CEO of Volkswagen and of holding company Porsche Automobil Holding, which sold 49.9% of Porsche AG, the sports-car business, to Volkswagen for €3.9 billion ($4.96 billion) in December 2009. Volkswagen acquired options to take over the remaining 50.1% in defined time slots over the coming years.
Porsche's initial plan to take over the much-larger Volkswagen in a daring, debt-financed maneuver in 2008 backfired when credit markets dried up during the financial crisis. That triggered the departure of Porsche's top management. Porsche then had to agree to a tie-up under Volkswagen's leadership. The two signed a tentative pact in August 2009 aimed at getting shareholder approval for a merger by the end of last year.
However, in 2010, a group of international investment funds sued Porsche and its top two executives at the time of the takeover bid for allegedly cornering the market in Volkswagen stock in 2008.
Although a U.S. district-court judge dismissed the lawsuit in January 2011, Volkswagen and Porsche decided in September to delay their initial merger plan due to the persistent legal uncertainties and look into possible alternatives.
A group of international investment funds filed a lawsuit against Porsche in the district court in Stuttgart, Germany, Dec. 31. The plaintiffs seek to recover around €2 billion in losses related to the sports-car maker's attempt to take over Volkswagen in 2008.
A similar lawsuit has been filed at a regional court in Germany, and German public prosecutors are also looking into the matter. These investigations are continuing and the timing of an outcome remains uncertain.
Volkswagen's plans are complicated by several factors, said Georges Dieng, an automotive analyst at Paris-based brokerage house Natexis Securities. It is hard for the company, Europe's biggest auto maker by sales, to maximize synergies without a full merger with Porsche, while it can't exercise its option to buy the sports-car business before next year. In the meantime, booming luxury-auto sales have increased the value of Porsche's sports-car unit since the merger agreement was first struck in 2009.
"The best thing would be to renew the comprehensive (merger) agreement... and go on from that basis based on a merger... toward a merger. That would buy time during which the risks linked to litigation could be evaluated," Mr. Dieng said.
Volkswagen and Porsche have mutually exercisable call and put options for the remaining 50.1% of Porsche's sports-car unit that Volkswagen doesn't already own. If Volkswagen exercises its options to buy the rest of the sports-car business, the holding company would remain a separate entity but will have no actual businesses.
Volkswagen has said that it could extract cost synergies of €700 million a year by fully integrating the Porsche sports-car business with the rest of its operations, which include the Audi, Bentley and VW brands.
Volkswagen preferred shares, its most liquid securities, closed 1.8% lower at €121.75 on the Frankfurt stock exchange Monday. Porsche's preferred shares fell 1.4% to €41.19. Frankfurt's benchmark DAX index was down 0.7%.
The Piech and Porsche families own 90% of the Porsche holding company, which in turn owns around 50.73% of Volkswagen's voting shares. Germany's state of Lower Saxony has a 20% holding of Volkswagen. Qatar owns 17% of Volkswagen's voting stock and 10% of the voting shares in the Porsche holding company.
