The news of Porsche increasing its stake in Volkswagen to 30.9 percent didn’t come as a surprise at all. Well basically since this is exactly what the automotive industry was expecting in the first place.
Although it may be hard to believe that such increase of stake will not lead to a takeover but Porsche stressed that it plans to defend Volkswagen, Europe’s largest automaker and producer of quality VW motor mount ---from any possible influence from hedge funds and buyout groups.
It can be remembered that the last time that Porsche had increased its stake in Volkswagen it stated that it is simply trying to guard its investment. And just recently the knight-in-shining 911 Carerra has again raised its stakes to defend Volkswagen. But the main question now is: Does Volkswagen really needs such guarding? Or is it Porsche’s way of slowly taking over Volkswagen?
Now that Porsche has purchased an additional stake at Volkswagen it is to be expected that Volkswagen chairman, Ferdinand Piech whose family controls Porsche will be able to increase his dominance at Volkswagen. Come to think of it starting from the first time that Porsche bought a stake in Volkswagen in the year 2005, Piech has gained enough power which enables him to place Porsche executives on the board and oust the former chief executive to replace him with his favorite protégée Martin Winterkorn.
German politicians and family controlled companies have protested against the increased takeovers by venture firms which the German labor minister Franz Muntefering called as asset-stripping locusts.
Porsche is also offering €100.92 an ordinary share for the rests of the company, 14 percent below the close in Frankfurt on Friday which values Volkswagen at €42.7 billion. German securities regulators will determine the minimum offer for VW’s preferred shares.
Last Monday, shares of Volkswagen decline by €3.75 and closes at €113.95 in Frankfurt. On the other hand Porsche increased by €6.52 to close at €1,121.45.
According to a statement released by the Porsche last Monday, the company has exercised its purchase option to raise its holdings from 27.3 percent to 30.9 percent. Furthermore it plans to complete the acquisition of the shares on Wednesday. It should be noted that according to the German Law an investor is required to make a takeover offer to all shareholders once its holdings surpass the 30 percent ceiling.
The benefit that Porsche obtained from bidding is the freedom to make Future Volkswagen stake purchases whenever it sees fit. After Porsche is through making its minimum legal bids to all shareholders, German sports car manufacturer will no longer be required by law to present further purchase offers to all stakeholders.
Another analyst at Morgan Stanley in London, Adam Jonas said, "Piëch and Wiedeking are looking at this as a 1,000-year investment. This isn't a hedge fund making a trading investment that they'll get rid of in a few years."
