In an announcement today that surprised few and confused many, Porsche and Volkswagen made news by releasing information about their ongoing merger madness that requires an advanced degree in finance to make heads or tails of the various components. After a number of reads and a bit of research I think things distill down like this:
- Volkswagen is acquiring a 42% stake of Porsche AG (the sport car manufacturer and subsidiary of Porsche, SE that currently owns 51% of VW) for 3.3 billion euros or $4.7 billion dollars (placing an enterprise value of 12.7 billion euros on the entire unit).
- In order to finance the purchase, VW plans to raise capital by issuing new “preference” share in Volkswagen AG
Okay, let’s take a breather for a second. If I have this right, VW is going to raise capital by increasing their outstanding shares in order to purchase a 42% stake in Porsche, AG, which is currently owned by Porsche, SE (who owns 51% of VW). Is anyone else confused???
- In a further attempt to rid itself of the massive mountain of debt created during Porsche’s failed attempt to acquire VW, Porsche has the option to sell its trading business, Porsche Gesellschaft m.b.H, (another separate subsidiary of Porsche, SE) to VW. The current value of this organization, according to AutoNews.com, is 3.5 billion euros.
- Volkswagen CEO Martin Winterkorn was named CEO of the new Porsche SE entity while Michael Macht, the current CEO of Porsche AG will take a “top management position” in Volkswagen AG.
If all this wasn’t confusing enough, Lower Saxony, which owns a stake equal to 20 percent in Volkswagen, retains a veto vote that can block certain decisions and will nominate two members of the supervisory board.
Last but not least, let’s not forget about Qatar. Remember them? According to VW’s CEO (who is that again after all this?), Qatar will still have a place in the new company and in fact will become the third largest investor in the combined entity. While specific numbers have not been released, it is rumored to be 17%.
Last but not least, it appears that everything hinges on the approval of the key banks involved. Assuming that permission is granted, we can expect a completed integration by the end of 2011.
If anyone else has a different take on things or understands things differently, please let me know. I need all the help I can get!!!!
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[Source: Porsche SE, Autonew.com]