In a terse statement issued late yesterday, Volkswagen AG’s Board of Management said that the planned takeover of Porsche will not go forward this year as originally proposed to shareholders. The latesd twist in the Porsche saga comes after an unfriendly takeover attempt by Porsche to swallow VW backfired in 2008 when loans used to buy VW shares were called during the financial crisis.
The financial maneuvering undertaken then by Porsche managers – since dismissed – have resulted in outstanding lawsuits, which could cause the takeover to collapse. VW bought 50% of Porsche’s car and SUV business in 2009 for €3.9 billion. VW then proceeded with a plan to issue more stock and buy the remaining shares over the next several years – ironically using financial leverage to benefit from a failed financial leverage strategy.
“Nevertheless, all parties remain committed to the goal of creating an integrated automotive group with Porsche and are convinced that this will take place,” the VW board said.
The announcement on the eve of the Frankfurt Motor Show also appeared to be an attempt by VW to protect the debut of the 911 sports car in Germany next week. The sale of the all new 911 models starts on 3 December 2011. However, the new Porsche sports cars can be ordered starting in late September. Prices in Germany are €88,038– hold your breathe, that’s $127,000, for the 911 Carrera and €102,436 – or $148,000 for the 911 Carrera S, including a punitive 19% VAT in effect in Germany.
The legal problems causing the delay are likely technical, but significant since the lawsuits prevent VW from valuing the shares of Porsche SE, which is required to set an exchange ratio of stock so the VW takeover of Porsche in process since 2009 can proceed.
Lawsuits or investigations are proceeding, slowly, in Germany and the United States for alleged market manipulation. According to the VW board statement, these legal hurdles are no longer expected to be removed this year. One factor influencing the Board of Management’s assessment was an indication by the Stuttgart public prosecutors of the length of time needed for the preliminary investigations.