Porsche conceded defeat in a months-long power struggle with Volkswagen Thursday by axing its embattled CEO, paving the way for VW to merge with the maker of the 911 sportscar. As a way to improve its negotiating position with Volkswagen, Porsche also said it would raise at least €5 billion ($7.1 billion) in equity as the two companies prepared to create an “integrated automotive group.”
Volkswagen said it planned to buy a stake in Porsche AG, the company's financially healthy sports car business, and “gradually” expand this over time. VW and Porsche would be fully merged by mid-2011, said Christian Wulff, premier of Lower Saxony, the German state that is VW's second largest shareholder.
“I'm optimistic that we can lay out the details of our agreement in principle during a supervisory board meeting on August 13,” he added.
He said the Gulf state of Qatar is set to buy a financial derivatives package that controls 17% of VW shares, in a further move to ease Porsche's financial woes. It could expand its stake by acquiring non-voting preferred shares.
Porsche shares ended the day up 0.3% at €51.75, while Volkswagen was up 1.2%at €255.00 and the DJ Stoxx European autos index was 2% higher.
Porsche amassed more than €10 billion in debt during a botched attempt to build a 75% stake in VW. Weighed down by the debt, Porsche was forced to abandon further stakebuilding earlier this year and negotiate a merger instead. (Reuters)