Panic At Porsche
Yesterday, Porsche went through more mood swings in a single day than a manic depressive in three months. In the morning, Munich’s Süddeutsche Zeitung, usually well clued into high level auto gossip in Germany, had the good news that the public prosecutor in Stuttgart had dropped most of the investigation into former Porsche CEO Wendelin Wiedeking and former CFO Holger Härter. Supposedly, no evidence of share price manipulation was found. With that out of the way, the formal amalgamation of Porsche into Volkswagen could now progress at full speed, said the paper. However, they were misinformed.
Later in the day, it became known that only half of the share price manipulation probe was dropped. The duo is still a target of preliminary proceedings for having withheld pertinent information. To make matters worse, the prosecutor opened another inquest against Wiedeking and Härter for embezzlement.
Late on Wednesday evening, Porsche issued a bleak statement. The new situation definitely delays, possibly derails the fusion of Volkswagen and Porsche, the statement said. “From the management board’s view this also reduces the probability that the merger can be achieved under the timeline of the basic agreement from previous 70 percent to 50 percent.”
The man who holds the future of Porsche in his hands is Siegfried Mahler. He heads the public prosecutor’s office in Stuttgart. He declared that the proceedings will “surely drag on well into 2012.”
Please note that what is delayed is the legal part of the merger. Once Volkswagen formally owns Porsche, Volkswagen is exposed to any claims against the company. As long as they don’t formally own Porsche, Volkswagen’s deep pockets are off-limits to any litigants. Volkswagen will wait until any potential claims go away. Otherwise, Volkswagen and Porsche are for all practical purposes merged.
Says Der Spiegel: “VW CEO Martin Winterkorn wants to integrate Porsche into the group as the tenth brand. The legal problems notwithstanding, these plans are unlikely to change. In the event of a failed merger, Wolfsburg could buy the remaining Porsche shares outright.” At a greatly reduced price, that’s for sure.
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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IIRC, and I may not, Porsche bought options and had no duty to disclose what they controlled under German law. That was how the hedgies got caught in a short squeeze. Porsche owned 40+%, optioned 30+% and Lower Saxony owned another 20% which they would not sell. Instant short squeeze and, truly, who gave a damn about hedge funds?
Thats partly true - german courts have ruled that it depends on the way those options are structured if they have to be disclosed like owned stock. This however should be the part of the investigations that has been dropped. The open question is if Porsche/Wiedeking/Härter had the plan to take over 75% of VW all along, even when they said they only wanted a minority share (back in 07) or a slight majority (early 08). Thats certainly a hard thing to prove, which is why the prosecutors office said it would take more than the rest of the year to investigate... However, VW managers internally said that it doesn't really affect any of the operational business and cooperations done with Porsche. This is about the merger of the holding company Porsche SE and VW, not the Porsche AG, which builds cars and is now jointly owned by Porsche SE (50,1%) and VW (who are themselves owned by Porsche SE to 50.x%). And also don't confuse that company with the "Porsche Holding GmbH" which is a completely different company, that had nothing (directly) to do with the whole takeover, but has also been sold to VW recently...)