Intensive negotiations between Volkswagen and Porsche have concluded successfully, with both supervisory boards endorsing the acquisition on Friday last week, ending years of struggle between the two German automobile giants which are partly owned by two estranged clans of the same family.
The combined organisation would become the world’s number one producer of cars in terms of volume sold, and whilst this may represent the very antithesis of what makes a premium brand attractive, it does protect both companies from future hostile takeovers, particularly Volkswagen which was vulnerable should Porsche have sold its shareholding.
Porsche made an unsuccessful bid to take over the much larger Volkswagen earlier this year, causing its CEO Wendeln Wiedeking to leave the company in July. It acquried substantial debts largely due to this unsuccessful bid, achieving a 51% stake in Volkswagen but falling well short of the 75% required to take over the company when it could not raise further money due to the global financial crisis and decline in car sales.
The merger between the two companies is being planned in two phases. Volkswagen will take-over 49.9% of Porsche by the end of 2009, with full integration of the companies by 2011. Porsche will continue to operate as an independent company within the VW family, however steps to reduce Porsche’s debt burden have already been taken.
Negotiations have been concluded with Porsche’s bank consortium for the repayment of its existing major loan. In this case, the Porsche SE credit line of 10.75 billion euro is being replaced by a new credit line, which reaches a total volume of up to 8.5 billion euro. The sum will be distrubted across a series of tranches covering a 2 to 3 year period, with a reduced interest burden.
Whilst some might see this as the death-knell for Porsche, which was once the most profitable automotive brand in the world, Volkswagen’s track record with Lamborghini has seen the Sant’Agata company grow and introduce many new and exciting models, so the end of Porsche as an independent family-owned manufacturer should perhaps be seen as the opportunity for things new.
But what do you think?
Written By
Steve Davies
Steve is an investor, private equity advisor and former Partner at KPMG, PwC and Bain. Most importantly he's a life-long car enthusiast, mountain biker and active sports enthusiast. He designs and builds technology platforms and is the architect behind Transmission.
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