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FRANKFURT - Porsche took advantage today of a surge in Volkswagen stock to meet a mandatory requirement to offer to buy out all remaining shares at a price few investors are likely to accept.
Porsche, which controls 27.3 per cent of VW's voting rights and holds an option
to buy a further 3.7 per cent, said it planned to boost its stake to up to 31 per cent soon -- a move that triggers a mandatory takeover bid under German law.
"Porsche is firmly convinced that a closer bond with VW through an increase of the stake to more than 30 per cent of the Volkswagen ordinary shares will produce benefits for both partners without diluting or indeed endangering the identity of Porsche," it said in a statement.
The iconic sports car maker hopes that by offering investors the minimum amount required -- which is expected to value VW shares at a hefty 14 per cent discount to Friday's closing price -- it can cross the 30 per cent threshold on the cheap and never be forced to launch a bid again.
"We don't want a majority," a Porsche spokesman said.
For ordinary shares the offer is expected to be 100.92 euros per share while for preferred shares no specific figure was given, with the amount to be determined by the German securities regulator BaFin.
The announcement caps months of speculation that a bid was imminent, driving VW stock up by more than a third this year to new record highs, as many investors believed Porsche part-owner and VW chairman Ferdinand Piech wanted to cement his control over the world's fourth largest carmaker.
A London-based automotive equity analyst said Porsche may have been waiting for a surge in VW shares before crossing the threshold in order to avoid paying nearly 26 billion euros to buy up the remaining equity in free float.
"Had the stock price traded in a narrow corridor for three months before they launched one, then the legal minimum would have been much closer to the spot price and they wouldn't have been able to control how many investors might take up the offer," he said.
"The share price jump in the past few days offered Porsche an opportunity therefore to ensure the likelihood will be low that shareholders accept the bid," the analyst continued.
Pressure to consolidate
Volkswagen's second-largest shareholder, the German state of Lower Saxony, said it would remain invested in the company.
Volkswagen welcomed Porsche's plans to raise its stake as a move that further secures their joint cooperation to build cars, engines and components, but VW declined comment on the offer and the bid price until it has been formally submitted.
Porsche said the decision to cross 30 per cent followed a recommendation on February 13 from an adviser to Europe's highest court that its judges should force Germany to either abolish or change the Volkswagen Law, which limits individual investors from exercising more than 20 per cent of the company's votes.
"We expect that law will be repealed entirely," the Porsche spokesman said.
The sports car maker believes raising its stake and securing their ties would help both companies better adapt to the industry's pressure to consolidate amidst ever increasing international competition -- especially from the up-and-coming nations such as China, India, Malaysia, Russia and others.
"Cooperations and alliances are not uncommon even today, but in the not-too-distant future they will be a part of everyday life. Both Porsche and Volkswagen will be prepared for this," Porsche said.
- REUTERS