VW-Porsche deal stalls
Volkswagen has called off a round of merger talks with Porsche, a source close to VW Chairman Ferdinand Piech said, adding talks would not resume until Porsche’s financial situation was clear. Porsche preferred shares hit the skids as fears that the financial engineering needed to pull off the deal may be beyond even German know-how.
Despite a healthy sports car business that the holding company says still earns enough to make interest payments on 9 billion euros ($12.19 billion) in net debt, the listed parent of Porsche is reported to be sounding out German state bank KfW about a 1 billion euro loan. Porsche declined direct comment on the report, saying only: “We do not name the banks with whom we negotiate.”
The families that control Porsche have a 51 percent stake in VW and they would like to drive that to controlling interest of 45-55 percent in the combined entity. Analysts have gone to the drawing boards and been able to figure out how Porsche, a 6.8 billion euro company, swallows VW, a 70.3 billion euro company. Accounting for preferred shares and other market inefficiencies, they calculate VW’s actual market cap at as little as 25 billion euros; on a comparable basis, Porsche holds a 14.1 billion euro equity stake.
A little harder to figure may be the politics. The state of Lower Saxony holds a potentially deal-blocking stake in VW, and there’s a bit of bad blood sloshing about in there. So even if VW becomes more affordable for Porsche, its ability to jump-start the deal could still need more German engineering.
Other Deals News:
* A Grupo Mexico SAB de CV unit formalized its $1.55 billion offer for bankrupt U.S. copper miner Asarco LLC by filing its own proposal for Asarco’s reorganization in a Texas court.
* China’s top economic body has approved state-owned Minmetals’ agreed $850 million deal to buy debt-laden Australian miner OZ Minerals Ltd, bringing Minmetals a step closer to completing the transaction.
* Japan’s Daiwa Securities SMBC said that it would buy a financial advisory unit of Britain’s Close Brothers Group, as Japanese investment banks rush to sign cross-border deals.