Porsche Aims to Raise Holding in Volkswagen to 75%
By Andreas Hippin
Oct. 26 (Bloomberg) --
Porsche SE, maker of the 911 sports car, plans to raise its holding in
Volkswagen AG to 75 percent next year and outlined steps for reaching that goal in a way meant to reduce the stock's volatility in the past two months.
Porsche now owns 42.6 percent of Volkswagen's
common stock, has cash-settled options for another 31.5 percent and is sticking to plans to obtain a stake exceeding 50 percent by December, the Stuttgart, Germany-based carmaker said today in a statement. The disclosure is aimed at giving ``short-sellers the opportunity to close their positions unhurriedly and without bigger risk.''
Porsche has been seeking control of Europe's biggest carmaker since March to boost margins as it faces fiercer international competition. European carmakers are under pressure as the global financial crisis and economic slowdown hurt demand for new vehicles.
``Porsche wants to decide the time and the terms under which it consolidates Volkswagen,'' said
Christoph Berger, 31, a Frankfurt-based fund manager at Cominvest Asset Management. ``Today's statement explains to a certain extent the Volkswagen share-price development over the past few weeks. Hedging against options sold to Porsche has probably driven the share price more than fundamental factors.''
About 15 percent of Volkswagen's
common shares as of last month were on loan, mostly for short sales, according to London- based research firm Data Explorers.
Automakers Slump
Volkswagen
shares fell 23 percent, the most in almost two decades, on Oct. 20 as short sellers bet the price will decline once Porsche gains control. A month earlier, the stock rose the most in at least 19 years as market turmoil prompted investors to close short positions.
Automakers are feeling the full force of the global economic slump, with PSA Peugeot Citroen reporting third-quarter revenue down 5.2 percent last week and Renault SA posting a 2.2 percent decline. Volvo AB, the world's second-largest maker of heavy trucks, cut its industry growth outlook and Toyota Motor Corp. said sales dropped for the first time in seven years.
Volkswagen, which reports earnings Oct. 30, may have increased third-quarter net income 1.5 percent to 961 million euros ($1.2 billion), based on estimates from five analysts in a Bloomberg survey. Sales probably rose 4.9 percent to 27.4 billion euros. The company was the only one of Europe's top 10 carmakers to report an increase in sales in the region in September.
Stock Volatility
Short-sellers borrow stock on expectations they can repurchase the shares later at a lower price. The proportion of shares in Wolfsburg, Germany-based Volkswagen that were on loan was the highest of any company on Germany's 30-member benchmark
DAX Index, according to the Data Explorers figures.
Hedge-fund traders have wagered that the
difference between Volkswagen's common shares, which carry voting rights, and its
preferred stock, which doesn't, will narrow in favor of the latter. Of 39 analysts covering Volkswagen, 32 have ``sell'' recommendations on the stock. Only one advises investors to buy the shares.
Common stock in Volkswagen, Europe's largest carmaker, is up 35 percent this year, valuing the company at 66.6 billion euros ($84.1 billion). The stock, which cost 210.85 euros as of Oct. 24, is the only gainer on either the DAX or the nine-member
Bloomberg Europe Autos Index. Its performance contrasts with the preferred stock, which has dropped 56 percent to 44.24 euros this year, according to Bloomberg
data.
Options
When exercising the options, the underlying Volkswagen shares will be bought at the market price, Porsche said today. Porsche will receive the difference between the market price and the option strike price, the company said, without specifying either figure.
``If Porsche raises its stake beyond 75 percent, preferred shares will probably replace common shares in the DAX'' according to German market rules, Cominvest's Berger said.
Volkswagen spokesman
Peik von Bestenbostel said that Porsche's announcement was expected after the company's recent comments.
The carmakers will meanwhile work out a so-called control agreement, which outlines decision-making powers that Porsche will hold once it reaches the target holding, the sports-car maker said.
Porsche has been buying shares in Volkswagen since 2005 to protect ties to its biggest supplier and has said since March that it would seek a majority stake. The purchase is opposed by Volkswagen worker groups seeking more representation on the Porsche supervisory board and by some German politicians.
`Catastrophe'
``It would be a catastrophe for Volkswagen's more than 360,000 employees if managers who spurn workers' rights gained control over the company,''
Bernd Osterloh, the works council head at Volkswagen, said today in an e-mailed statement. ``We are strictly against a control agreement. Even though Porsche has always denied it, we knew they were going for it.''
The sports-car maker said on Oct. 24 the Porsche and Piech families that control it, as well as
Uwe Hueck, head of the company's works council, agree on all corporate plans, including terms of the Volkswagen takeover and labor representation.
Volkswagen Supervisory Board Chairman
Ferdinand Piech, who is also a Porsche board member, ``unconditionally supported'' Porsche's company policies and press reports to the contrary ``had led to irritation'' among employees, the sports-car maker said in the Oct. 24 statement.
That comment was the company's second since a report in Der Spiegel magazine in early September said that Piech had wanted to remove Porsche Chief Executive Officer
Wendelin Wiedeking amid a dispute over Volkswagen takeover terms.
The German state of Lower Saxony is the second-largest investor in Volkswagen with a stake of more than 20 percent. The Volkswagen supervisory board voted Sept. 12 to retain a company- charter provision giving any shareholder with 20 percent a blocking vote on major decisions, protecting the state's say over the company.
Source: Bloomberg
