Porsche seeks OK for 25pc control of Volkswagen

23rd June 2006, Comments 0 comments

23 June 2006, STUTTGART, GERMANY - Sports-car maker Porsche, already the biggest shareholder in Volkswagen, said Friday it was seeking regulatory approval to increase its stake to a "controlling minority" in the volume-car producer.

23 June 2006

STUTTGART, GERMANY - Sports-car maker Porsche, already the biggest shareholder in Volkswagen, said Friday it was seeking regulatory approval to increase its stake to a "controlling minority" in the volume-car producer.

The Stuttgart-based company said it was intending to acquire a further 3.9 per cent of the ordinary shares of Volkswagen, over and above the 21.2 per cent it currently holds.

With just over 25 per cent of Volkswagen, Porsche would in effect be able to prevent a takeover or breakup of Europe's biggest carmaker by rival interests or hedge funds, industry insiders said.

The application for approval was filed with the Federal Cartel Office, which monitors mergers in Germany.

Volkswagen stock stayed steady on the news, trading in Frankfurt at 53.10 euros, a gain of just 0.2 per cent, after Porsche said it had hedged against a price rise.

"Porsche AG has been contemplating raising its stake since autumn 2005," the statement said. "In order to prevent any price risks, the company has concluded forward-rate agreements, which enable the ordinary shares to be purchased at a fixed price."

Porsche's advance on VW has been generally regarded among Germans as a way of preserving German control of Volkswagen if the European Court of Justice strikes down a Volkswagen-only law that gives shareholders blocking power with only 20 per cent of VW shares.

That power is currently shared by the German state of Lower Saxony, which holds 20.8 per cent of VW.

Volkswagen makes Skoda, Audi, Seat and Volkswagen cars. Its own brand is currently dogged by low profits that it blames on over- manning and low productivity. By the time Porsche has finished, it will have spent 3.5 billion euros in cash on VW shares.

Although smaller than Volkswagen by both volume and turnover, Porsche is highly profitable and reportedly has ample reserves.

At Porsche in Stuttgart, a spokesman declined to say if Porsche would exert greater control or make cars in tandem with VW.

"We don't discuss product policy in public," he said.

Porsche said it anticipated that the Cartel Office would approve its plans without delay and Porsche would implement the Volkswagen stock purchase as soon as approval was granted. However it had not yet put the share purchase transaction into place.

DPA

Subject: German news

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