Porsche prepares to enter Auto Union with VW

August 12, 2009

porsche-911gt2It’s been a tortuous road, but Porsche looks as though it might finally have struck a deal with VW and Qatar to sort out its debt problems.

A Reuters report says that details of a deal between Volkswagen and Porsche have been broadly agreed, with VW set to buy a stake of up to 49 percent in the sportscar maker. The Porsche marque will then enter into a new “Auto Union” as the 10th brand, under the leadership of VW CEO Martin Winterkorn.

The crucial point here is that the family-owned holding company Porsche Automobil Holding SE will get a much-needed cash injection from the sale — anywhere between 4 and 5.5 billion euros —  as well as an additional 5 billion euros from selling a package of options on VW shares to the Gulf state of Qatar.

The Porsche clan has already agreed to sell shares to raise at least 5 billion euros, so it should finally be in a position to pay off debts of more than 10 billion euros it stacked up building up a stake of just over 50 percent in VW.

That’s good news for the banks involved and eases the way towards a full merger, but minority shareholders in both companies will want to see all the details before they can really tell what their holdings are worth.

After all, VW shares are still trading at above 220 euros, when many analysts give them a fair value of less than half that — in a range of between 70 and 100 euros per share.

The end game for both Porsche and VW is to merge the two companies. And while arguments over valuation have apparently been settled, we’re not quite there yet.

So for Porsche watchers, there could be more thrills and spills before this saga ends.

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