The lengthy and turbulent drama surrounding a planned tie-up between Volkswagen AG and Porsche Automobil Holding SE will have its finale in August, after Volkswagen agreed Wednesday, July 4, to pay €4.46 billion ($5.61 billion) and one share for the 50.1% of Porsche's carmaking unit that it doesn't already own.
The deal comes almost three years after Volkswagen bought an initial 49.9% stake in the unit, Porsche AG, for €3.9 billion. That was to be followed in 2011 by a full merger, which was then delayed until 2014 to give Porsche Automobil Holding time to fight billions of euros of lawsuits and allow Volkswagen to avoid about €1 billion of tax associated with the takeover.
Wolfsburg, Germany-based Volkswagen said late Wednesday, July 4, that it had decided to bring the merger forward after its lawyers discovered a loophole, approved by the German tax authorities, that allowed it to classify the takeover as a restructuring that is exempt from taxes.
"The accelerated integration model that has now been agreed is based on the Umwandlungssteuergesetz (Reorganization Tax Act) and the Umwandlungssteuererlass (Taxation of Reorganizations Circular) which was published at the end of 2011, as well as advance rulings from the relevant tax authorities," Volkswagen said.
The timetabling twists and turns are just one small feature of a saga that began in 2008 with a Porsche Automobil Holding bid for Volkswagen. It included a short-selling squeeze that briefly made Volkswagen the world's most expensive company; forced Porsche Automobil Holding to beg unsuccessfully for state-funds as it struggled with €10 billion of debt, triggered billions of euros of lawsuits; led to the ouster of Porsche Automobil Holding CEO Wendelin Wiedeking and ultimately to victory for Volkswagen's counteroffer.
The deal announced on Wednesday, values the 50.1% equity stake in Porsche AG, at €3.88 billion and includes dividend payments to Porsche Automobil Holding and a payment of 50% of the about €320 million in "synergies" that the deal is expected to deliver.
The purchase of the remaining Porsche AG stake would dent Volkswagen's €15.8 billion cash pile by about €7 billion, taking into account Porsche AG debt as well as the cash payment for the stake.
Stuttgart-based Porsche Automobil Holding is the holding company of the Piech-Porsche family. Alongside its 50.1% stake in Porsche AG, the family's investment vehicle also owns 50.7% of Volkswagen, the residual part of a holding acquired in 2008 when it surprised the market by declaring that it owned 74% of Volkswagen. The announcement led to a squeeze on Volkswagen shares, which briefly rose to almost €500 per share, more than twice their previous high, as hedge funds sought to cover their short positions.
Volkswagen is Europe's biggest automotive company and makes more cars in a day than Porsche AG makes in a year. Porsche AG will join Volkswagen's stable of brands, which includes Audi, Bentley, Bugatti, Seat and Skoda.
"The unique Porsche brand will now become an integral part of the Volkswagen Group.," said Volkswagen CEO Martin Winterkorn in a statement. "That is good for Volkswagen, good for Porsche and good for Germany as an industrial location."
Shares in Volkswagen traded Thursday at €127.65, up €7.4, or 6.1% on their previous close.
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