Wild Ass Rumor of the Day, or Not: Daimler to Buy Porsche to Buy VW

On Friday evening, a wild rumor whirred via the wires. It started at Germany’s usually well informed Manager Magazin, then spread to Reuters and Bloomberg: Daimler may be taking a stake in its Stuttgart neighbor, Porsche. Through Porsche, Daimler would own a part of Volkswagen.

According to Manager Magazin, Daimler’s Zetsche and Porsche’s Wiedeking have had negotiations since May. Not surprising as in May it had become very apparent that Porsche was unable to finalize the Volkswagen takeover. In May, Ferdinand Piech, part owner of Porsche and Chairman of Volkswagen, made loud noises about VW taking over Porsche instead and sending Wiedeking to Siberia. Or more warmer places. Like Hell. The matter turned into a billion Euro soap opera. Wiedeking talked to anybody who may have money, the Sheikh of Qatar, and why not Daimler, they live next door.

This Friday was a special day for Porsche. They announced their ten-month report of their 2008/2009 fiscal. Cars down, derivatives up. On Friday, 640K call options on the VW stock came due, along with 638K put options. Porsche is rumored to be behind most of the unusually high volume. It could be a highly risky short straddle engineered by Porsche CFO Härter, Manager Magazin thinks that the puts could also be insurance bought by the banks who sold the calls to Porsche. Porsche doesn’t have the money to exercise the calls. If the calls expire, the banks (market makers in Germany) could sell the underlying VW shares, shares drop, a big no good for the 51 percent owner, Porsche. Porsche is NSFWd. Manager Magazin thinks the banks gave Porsche a stay of execution—so to speak—and told Porsche to come up with the money elsewhere. The banks have Porsche by the short and curlies. A little payback for last year’s short squeeze, that cost banks and funds billions, and claimed at least one life.

Enter Daimler. Daimler could take the derivatives off Porsche’s hands, exercise them, and voila, own 25 percent of Volkswagen. Daimler could also buy a chunk of Porsche shares outright. Manager Magazin says Wiedeking asked the Porsche/Piech families last week for permission to sell Porsche shares to external investors. The families said no, but will re-visit the matter next week.

Daimler recently got money from Qatar’s neighbor Abu Dhabi. A 9.1 percent stake was sold to Abu Dhabi’s state-controlled International Petroleum Investment Company (IPIC) for almost €2 billion ($2.78 bn). That puts a €22 billion valuation on Daimler. Car companies come cheap these days.

In the denial dept., Reuters reports that “a spokesman for Daimler called the report ‘pure speculation’ and a Porsche spokesman said he had no knowledge of talks with Daimler. A Volkswagen spokesman did not want to comment on the report.”

“We absolutely don’t comment on speculation,” Hartmut Schick, a Daimler executive, told Bloomberg. Schick would neither confirm nor deny the report.

At least Daimler got it right. Pure speculation it has always been. Daimler is not doing so well either. Benzes are a tough sell. S&P just downgraded Daimler from A to BBB+.

Anyway, “an industry source told Reuters that the report should be taken seriously.” Didn’t someone say that the industry has to consolidate? Sell Opel to Russia (or if all fails, to China), create a Volksporschedaimler (owned by Austrians and Saudis), and if BMW doesn’t come on board, NSFW ’em. Sounds boring and benign compared to what else is happening in the car world. Anyway, Porsche and Daimler go a long ways back. About 100 years.

Austro Daimler revisited? Picture courtesy flickr.com.