Porsche Raises Stake In VW To Block Predators

March 26, 2007
Analysts speculate that ultimate goal is takeover of VW.

Porsche, the German maker of luxury sports cars, said on March 27 that it was raising its stake in Volkswagen, Europe's biggest car maker, in a move to thwart potential predators. Porsche said in a short statement that it would exercise a so-called call option to buy an additional 3.6% stake in VW, with the purchase to be completed on March 28.

The additional shares would raise Porsche's stake in VW to 30.9%, effectively obliging the luxury sports car maker to launch a public takeover for all outstanding shares. But on Saturday, Porsche indicated that it would submit a bid merely at the legal minimum, which was calculated to amount to 100.92 euros (US$134). Since that would be well below the current share price on March 26 of 112.27 euros, few shareholders were expected to take up Porsche's offer. And that would suit Porsche, which has said it had no intention of buying all of VW's share capital just yet.

But analysts saw the move as a clever way for Porsche to increase its say in VW without being forced to pay over the odds for any additional shares. Furthermore, Porsche could be speculating that VW's share price would fall in the wake of the announcement, thereby enabling them to buy up additional shares more cheaply.

If the public takeover offer fails, as expected, Porsche can stealthily build up its stake to up to 50% without being obliged to disclose the exact size of its shareholding. And that would help scare off any potential predators.

Industry observers are convinced, however, that the ultimate goal of the niche maker of the prestigious 911 luxury sports cars is to gain full control of the mass producer of the Golf.

Porsche, whose annual sales stood at just 96,800 units last year, is the world's most profitable car maker, turning in net profit of 1.39 billion euros.

Copyright Agence France-Presse, 2007

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