Volkswagen AG moved closer to its aim of becoming the world's top car maker by buying up the remaining half of Porsche in a deal that ends a protracted takeover struggle that has sparked family feuds and investor lawsuits.
The deal will enable VW to escape a tax bill of €1.5 billion (R15.27 billion) and enable it to speed up Porsche's integration into a multi-brand empire that aims to sell 10 million vehicles a year and become the world's No.1 by 2018.
VW chief executive Martin Winterkorn told reporters at the group's Wolfsburg headquarters: “We're wrapping up one of the most significant projects in the automotive world.
“Together we are more capable than ever of becoming the best auto company on the planet,” he said, adding that VW was poised to invest “massively” in new shared technologies and production.
Joint projects already underway include Porsche's next model, the Macan mid-size SUV, due for a 2014 launch. VW plants already provide the painted car bodies for some Porsche models and will build the Porsche Boxster in new factory in Osnabrueck, Germany.
Already a major player in emerging markets such as China, Russia and Latin America, Volkswagen will also need a bigger US presence if it is to win and maintain the global crown.
VW opened a $1 billion (R8.2 billion) factory last year in Chattanooga, Tennessee and is adding an Audi plant in Mexico.
“VW is getting a good deal,” said London-based Morgan Stanley analyst Stuart Pearson, predicting in a note to investors that its completion would lift VW earnings by six percent in 2013.
“Porsche is the world's best premium car story.”
The two companies share the same genealogical roots and analysts believe their common history will ensure the success of their integration, compared with other mega-mergers - such as that of Daimler AG and Chrysler - which have failed.
Ferdinand Porsche, the founder of the sports car company and patriarch of the Porsche and Piech clans, invented the Volkswagen Beetle. His grandson Ferdinand Piech has ruled over VW for nearly 20 years, first as CEO and then as Chairman.
Holding company Porsche SE had initially hoped to acquire Volkswagen in a leveraged buyout and tap VW's coffers to fund the deal. The controversial plan hatched by Porsche SE's star CEO Wendelin Wiedeking drove a wedge between the two clans at the time, but they reconciled after Wiedeking's risky manoeuvre pushed the holding company to near bankruptcy.
The Porsches and Piechs agreed to sack him, raise €5 billion (R20.4 billion) in a massive capital hike, sell their dealership group - Europe's largest - to VW and sign off on a distressed deal that would leave Porsche just another brand in VW's massive empire.
But, with Porsche's global sales running 20 percent above their previous record, the main challenge facing the maker of the iconic 911 coupe is to increase production capacity and integration with VW may help.
BUYOUT PRICE
The buyout price - €3.88 billion (R39.5 billion) takes VW's total outlay to nearly €8.4 billion (R85.5 billion) for the entire business, excluding another €2.5 billion (R25.5 billion) in assumed debt.
Since 2009, when the basic purchase price was fixed, Porsche's sales have soared and its debt repayments have fallen with interest rates. VW now values Porsche at “clearly more than €20 billion (R204 billion)”, chief financial officer Hans Dieter Poetsch said on Thursday, pointing to the brand's 18 percent-plus profit margin.
The Volkswagen group - including brands as diverse as Skoda, Audi and Lamborghini - is currently ranked No.3 after Toyota and General Motors. - Reuters