Way Cleared for Porsche to Buy VW?

[WRXWagon2112]

A European court has struck down a German law that shielded VW from hostile takeovers. Some say this paves the way for Porsche to up it's stake in the company - or possibly buy it.

WashingtonPost.com article:

EU Court Strikes Down VW Law

By MATT MOORE and AOIFE WHITE
The Associated Press
Tuesday, October 23, 2007; 7:57 AM

FRANKFURT, Germany -- The European Union's highest court struck down a German law shielding Volkswagen AG from hostile takeovers, clearing a path for Porsche AG to increase its influence _ and possibly even take control _ at Europe's biggest automaker.

The decision Tuesday is expected to have ramifications across Europe, where many governments have tried to protect companies they see as vital to their economies from takeovers, particularly foreign ones.

German politicians and labor unions had argued that the 47-year-old law was needed to protect local jobs, but the European Court of Justice said the measure was illegal and limited "the free movement of capital" that is a tenet of the EU.

The ruling is a triumph for the European Commission, which has fought several battles against European governments and their "golden shares" in critical companies.

The court ruled that the "VW law" discouraged foreign investors from taking a stake in Volkswagen, because German authorities are able "to exercise considerable influence" over the company. The state of Lower Saxony is VW's second-biggest shareholder.

"This situation is liable to deter direct investors from other member states," the court said in a statement.

The law caps a shareholder's voting rights at 20 percent, whatever the size of its holding.

European Union regulators took Germany to court in 2005 over the law, saying the right to do business anywhere in the 27-nation bloc is hindered if governments interfere with companies.

The EU has since lined up or threatened cases against Spain over allegations it is protecting energy companies like Endesa SA, Italy for blocking a takeover attempt of highways company Autostrade SpA, and Poland for hindering Italy's UniCredit SpA from consolidating its grip over a local bank.

Volkswagen said in a statement it would examine the ruling and its "potential consequences."

Germany's federal Justice Ministry said it would move immediately to comply with the ruling.

The country's biggest industrial union, IG Metall, criticized the ruling. Union leader Juergen Peters said it was a sign of European institutions' distance from ordinary people if "free movement of capital and thus the interests of investors are given a higher value than the interests of employees."

or Porsche, which has spent about 5 billion euros ($7.08 billion) building up a 31 percent stake in Volkswagen since 2005, the ruling gives it the go-ahead to increase its holding.

Porsche Chief Executive Wendelin Wiedeking said the company was "naturally very interested in being able to fully exert our voting rights" in Volkswagen. However, he did not refer to the possibility of a takeover _ which many analysts expect.

Stuttgart-based Porsche _ which reportedly has secured a $14.2 billion line of credit to buy Volkswagen shares _ said it did not plan to immediately raise its stake but that the issue would be addressed when its supervisory board meets next month.

Because the combined holdings of Porsche and Lower Saxony exceed 50 percent of Volkswagen, the door already is closed for any would-be foreign suitors.

Volkswagen's board chairman and former CEO, Ferdinand Piech, is a member of the family that controls Porsche.

"Today's decision marks an historic moment where VW moves from the status of a state-controlled company to that of a family-run company," Morgan Stanley analyst Adam Jonas wrote in a research note.

He added that Volkswagen would benefit from more control by Porsche and its executives given that they are some of the "most skilled capitalists in the global auto sector, with an obsession for efficiency, product quality and brand management _ all skills which can help VW greatly."

Were Porsche to acquire Volkswagen, it would be a case of a smaller company gobbling up its larger partner.

Porsche sold 97,515 cars in the year ended July 31, with sales rising 3.4 percent to 7.4 billion euros ($10.48 billion). The company expects its pretax profit for that year to be significantly more than the 2.1 billion euros it posted for 2006.

Volkswagen _ with brands including Seat, Skoda, Audi and Lamborghini _ sold 3.1 million cars in the first six months of 2007 and expects its sales for this year to top the 104.9 billion euros it reported in 2006. It earned 1.96 billion euros ($2.78 billion) in the January-June period.

Porsche shares soared 4.4 percent to $2,427.94. Volkswagen initially rose after the ruling, then dropped back 3.1 percent to 174.80 euros $247.62.

--Alan

[avriette]

A European court has struck down a German law that shielded VW from hostile takeovers. Some say this paves the way for Porsche to up it's stake in the company - or possibly buy it.

This has interesting ramifications for BAE and EADS with respect to Boeing, who is clobbering them in their respective markets. The EU seems to have functioning anti-competition laws (with respect to Microsoft, for example), but is it anticompetitive for a foreign company to buy a local company? (in the case of, say, Airbus being purchased by Boeing from EADS)

[hotsam]

The major reason for Porsche wanting to do this is that a controlling stake in VW will lower Porsche's average emissions of greenhouse gasses, which means that they won't have to sacrifice the performance of their cars.

[WRXWagon2112]

This has interesting ramifications for BAE and EADS with respect to Boeing, who is clobbering them in their respective markets. The EU seems to have functioning anti-competition laws (with respect to Microsoft, for example), but is it anticompetitive for a foreign company to buy a local company? (in the case of, say, Airbus being purchased by Boeing from EADS)

Ding! Ding! This could have huge ramifications across all industries in Europe - and elsewhere since so many companies now operate globally.

--Alan

[spazegun2213]

The major reason for Porsche wanting to do this is that a controlling stake in VW will lower Porsche's average emissions of greenhouse gasses, which means that they won't have to sacrifice the performance of their cars.

that and the takeover will lead to VW's real money maker, Audi. They will also be able to use innovations across the brands to make better Porsches.

i cannot wait!!!

[Mr Kleen]

now the important question: will this make the Cayman S $32k?

[complacent]

now the important question: will this make the Cayman S $32k?

only if they label it a vw...

[Mr Kleen]

I don't care what badge I heat-gun off the trunk...

[avriette]

that and the takeover will lead to VW's real money maker, Audi. They will also be able to use innovations across the brands to make better Porsches.

i cannot wait!!!

Does this mean that Audi is going to stop raiding Lamborghini for parts (R8 anyone?) and instead be given flat sixes and RR configurations instead of MR's? Or maybe they'll make an Audi MRS6 that, you know, looks like a Cayman but isn't. Wow, then I could "bring the Misses" to meets. Maybe that's not such a bad idea.

[ElZorro]

Its certainly an interesting idea - having Porsche, Audi and Lamborghini all be very closely related... makes you wonder what they'll do from a branding perspective, would Porsche mess with Lamborghini? Would they insert technology into Audi? What would be the distinguishing factors between the brands? To me, I see Audi as more of a sedan/daily driver, Lambo as more of a rare/supercar and Porsche as somewhere in between.

[Mr Kleen]

there is no real overlap in the Lambo and Porsche markets. those are two very different customers and price points. well, other than the occasional limited production Porsche supercar.

[sirwilliam]

now the important question: will this make the Cayman S $32k?

only if they label it a vw...

Boo to that...then it will be plagued w/ problems...hopefully, Porsche can rub off on VW.

[spazegun2213]

there is no real overlap in the Lambo and Porsche markets. those are two very different customers and price points. well, other than the occasional limited production Porsche supercar.

I'd have to agree, the only think that porsche might take is audi's AWD (assuming its better than their current stuff). but i would not see porsche influencing Lambo anymore than VW already has. maybe make the cars a little lighter. But i can see porsche grab an audi/lambo v8 or v10 and stick it in something