Porsche to buy Volkswagen Group ?

Question

I keep seeing this in various MSN business reports. I have discussed it with a car trade expert.His reply was that on profit from car sales, it was an impossibility and that if it were talked about in reverse i.e. VW to buy Porsche, then that was possible, so, any ideas ?

Answer 1

Due to strong sales, excellent profite margins, and the ability to do outsource work in design and manufacturing for other companies, Porsche has managed to completely turn itself around from the financial difficulties it found itself in during the 1990s (when it was an oft rumored target of both VW and BMW).

This, combined with current difficulties by VW that have led to their stock price dipping lower and lower, Porsche took advantage of the situation and aquired a portion of VW (aided by the fact that VW has a number of members of the Porsche family on their board).

When VW's stock dropped further, Porsche cam in to purchase more - both as a business investment and a way to help leverage future mutual projects (such as the Toureg/Cayenne), and to help protect VW from being bought by foreign interests. However, as their ownership hit 30%, they were required by German law to make an offer for the entire company (something many suspected would keep Porsche from buying more than 29% of VW). Porsche did make an offer for all VW stock, but placed the offer well under market value, thereby satisfying the legal requirements.

While it is unlikely that Porsche will make a complete purchase of VW in the near future, if current trends continue, it would not be outrageous to think they might gain a controlling interest of more than 50%. The reverse though - VW buying Porsche - is not really possible at the moment. Porsche is a privately owned company, with their Class A stock owned entirely by members of the Porsche family. Unless the family choose to sell to VW, such a transaction would not happen. If they did, the fact that the value of Porsche includes 30% of VW's value, any such purchase done by a stock swap would likely put more than 50% stock ownership in the hands of the Porsche family, thus effectively making Porsche the owners of VW, even though it was VEW that made the purcahse.

Answer 2

I'd say your friend sounds about right. You would expect a large manufacturer like VW (4th largest in the world) to be able to buy a specialist sports car company like Porsche. Having said this, in 2005 Porsche acquired a 20% stake in ownership of VW. This was increased to 30% in May this year. Interestingly, in one report I read, it said that Porsche had borrowed eu10 million with the intention of buying VW. Given that Porsche has expanded into Luxury 4x4 and Roadster markets, it could be a move to diversify. Watch this space, I suppose.

Answer 3

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