Business - Porsche and VW

After many months of speculation and trading activity it seems a victor is emerging.

Volkswagen and Porsche have been closely locked in negotiations for months now over a possible acquisition.

The Porsche family had made clear hat they wished to purchase the VW group through and acquisition of majority share buy out.

The histories of the two companies are entwined from their beginnings and it had always been a desire of the Porsche family to regain Volkswagen.

Initially it was all Porsche making the move but in a bizarre twist VW came back with a move on the Porsche group. Back in early 2008 people were saying big things about Porsche.

By operating more like a hedge fund the directors generated an estimated £6 billion revenue with only about 10% coming from the car manufacturing wing of the company. On the back of this success Porsche announced it would increase its stake in VW from around a third to a controlling percentage in a deal worth around £9bn.

By October 2008 Porsche did buy causing havoc on the markets. Volkswagen share price rose rapidly making it momentarily the most valuable company in the world, ahead of Microsoft, Exxon Mobil and Wal-Mart (see Volkswagen - The Most Valuable Company in the World)

That deal seemed to go ahead smoothly and pave the way for the complete amalgamation of the company. The two have been working together co-operating on builds utilising the depth of experience within the VW Group that includes: Audi, Bugatti, Lamborghini, Skoda and SEAT. Things are never that simple with yet a new twist in the story.

Volkswagen has now announced that they have taken a 49.9 percent stake of Porsche for €3.9bn, with as they have stated, 'the acquisition of the trading business of Porsche Holding Salzburg is planned for 2011'.

By 2011 Porsche will be working with VW but not in the same role. VW will be calling the shots as Porsche will operate as a premium wing to the VW Group. The believe the move will reduce operating costs by €700m instantaneously.

In a statement announcing the move, VW said:

“Porsche ideally complements the brand portfolio. The Stuttgart-based carmaker will allow Volkswagen to further expand its position in the premium business, which offers particularly strong earnings.”

“In turn, as an independent brand under the roof of the Volkswagen Group, Porsche will have the potential for significant additional growth.”

E. Dooley

13/12/2009