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Volkswagen shares gain as Porsche gets majority

Shares in Volkswagen traded higher on Tuesday, pacing European auto stocks, following news late on Monday that Porsche SE raised its voting stake in the world's third-largest carmaker to a majority.

The much anticipated move triggers a mandatory takeover bid for Swedish truck maker Scania since ownership will indirectly pass to Porsche now that the sportscar maker has lifted its VW holding to 50.8%.

Ordinary shares in VW gained over 6% to trade above €270 euros, helping to drive the European autos subindex 3.2% higher. German blue chips gained just 0.7%.

Porsche shares were up 1.1% at 54.49 euros.

A Porsche spokesman confirmed late on Monday that the company still planned to increase its stake in VW to 75% at some point this year, given a favorable market environment.

“I think Porsche will stick with its 50% this year, since it would just be burning money to raise its voting stake to 75% at current prices,” said NordLB's Frank Schwope.

The analyst did not expect a clause in both the Volkswagen Law or the VW statutes to be abolished before the end of 2010, which requires Porsche muster at least 80% support before gaining full control over management and cash flows via a so-called Domination and Profit Transfer Agreement.

Until then, the state of Lower Saxony can veto Porsche's plans with its 20% blocking minority that has protected government influence at Europe's largest carmaker for decades.

“The call for state involvement has become popular ever since the nationalization of the banks, so the wind has turned against Porsche,” NordLB analyst Schwope added.

Porsche, which last disclosed a 42.6% voting stake late in October, said a month later that a high VW share price could force it to postpone plans to acquire majority control by the end of last year, but only just.

“It can happen now or it could also happen in January...whether it is then plus or minus four weeks, I cannot say,” Porsche finance chief Holger Haerter told Reuters late in November.

Porsche is now required by Swedish law to make a mandatory takeover offer but said it had no strategic interest in Scania and would only bid the legal minimum, since it was not interested in acquiring Scania shares.

Regulators are expected to name the bid price to Porsche in the coming days, and after a period of at most five weeks, shareholders in Scania should receive the published bid.

“The only real news was that they could not get around making an offer for Scania. Now that the bid is here, the speculation is over and the air will escape from the Scania shares,” said Sal. Oppenheim analyst Christian Breitsprecher, who expects profit taking in the Swedish truckmaker.

Stockholm's stock exchange is closed on Tuesday for a holiday, but Scania B shares were trading down in Frankfurt by 0.5%.

Porsche has already been forced to bid for the less than 1% of Audi shares in freefloat, but had agreed to sell any tendered stock back to Audi parent Volkswagen.

A source at Porsche said such a construct could be a possible option for Scania as well.

The Swedish truckmaker is currently controlled by Volkswagen with 68.6% of the votes, as well as MAN AG, which bought call options just before Christmas that give it access to more than 20% of Scania votes. (Reuters)