VW and Porsche Preparing Quiet Wedding

Bertel Schmitt
by Bertel Schmitt

Volkswagen and Porsche muzzled their alpha males, and the bean counters hammered out a deal. According to Reuters, “Volkswagen and Porsche have broadly agreed on details for a deal to combine two of Europe’s most storied automakers.” Reuters has it from two VW supervisory board members, so this should be pretty close to what will go down:

VW buys up to 49 percent in Porsche AG, the sports car unit of the Porsche/Piech-owned Porsche Automobil Holding SE.

The Gulf state of Qatar will buy Porsche’s package of derivatives, which are worth about 5 billion euros. These derivatives can be converted into a 17 percent stake in Volkswagen.

Porsche’s controlling families could sweeten the deal by selling some crucial voting shares to Qatar. It remains unclear whether Qatar will receive voting shares in Porsche, in Volkswagen, or in both.

VW’s home state of Lower Saxony most likely maintains its blocking minority stake of 20 percent.

The Porsche/Piech-owned Porsche Automobil Holding SE holds 51 percent in Volkswagen.

Are we confused yet?

The combined entity will most likely be led by VW CEO Martin Winterkorn (with Piech hovering in the background). They are still thinking of calling the new entity “Auto Union,” a move which this reporter had suggested in the late ’70s. (The invoice is in the mail.)

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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4 of 12 comments
  • Rnc Rnc on Aug 13, 2009

    Lower Saxony has always owned 20% of VW (has been a rather profitable investment for them), after the war the (German) state governments made investments to restart industry. Qatar is purely buying this as a diversification (they are not bailing out anyone, both companies are profitable, this isn't Opel). Porsche has a boatload of debt associated with the options for VW (since they are contracts it is considered debt) and this allows Qatar to assume 17% of volkswagon and unspecified amount of Porsche SE (the holding company (finance, dealerships and AG) which owns 51% of VW and will own 51% of Porsche AG while VW is buying 49% of Porsche AG (the car making part).

  • Juniper Juniper on Aug 13, 2009

    rnc spin it any way you want to. A "boat load of debt" that has to be payed and can't be without Qatar investment is a bailout in my book. Oh, and are you sure that wasn't US Marshal plan money that Saxony "invested"?

  • Rnc Rnc on Aug 13, 2009

    They could have paid it the whole idea was to combine VW and Porsche to protect both (in the end only 10% of VAG will be openly traded), it was a matter of control (when the VW laws weren't struck down porsche could have held 80% of VW and it couldn't have controled VW, so it might as well have sold the options to qatar), it doesn't matter which way it was accomplished the piech and porsche families will still control 51% of the combined entity when its all said and done, it was just a matter of which Alpha male won out, in the end it was the Piech alpha (chairman of VW) not the porsche alpha (chairman of Porsche). And no it was $300-500 million in Gold stashed in Switzerland before the war ended (not really ever talked about) those funds dwarfed the Marshall plan in funding the rebuilding of Germany.

  • Johnny ro Johnny ro on Aug 13, 2009

    Accounting wise (i.e. financial reporting to the Street wise), they have to designate an acquirer and an acquired company and estimate some goodwill on the transaction. They can't account for it as a merger. I don't really know which is which, maybe VW is the acquirer based on Saxony not being budgable plus Porsche mgt departure. Also which equity is available to the market afterwards. This does look a lot like a merger to me but I think it won't be accounted for that way. I might be inspired to look up VW financials and actually read them. Off topic, I read GM 10k a year and half ago, i think it was to read about goodwill impairment or maybe deferred tax asset impairment, and it was so dismal. Complete American systemic failure.