Porsche Sticking to $7 Billion Stock Sale Timetable Amid Market Volatility
Porsche SE, the sports-car maker that plans to merge with Volkswagen AG (VOW), said a timetable to sell 5 billion euros ($7 billion) in shares still stands amid the volatile financial markets following the Japanese earthquake.
“One would probably select an environment that’s different to the current one” to carry out a sale, Chief Financial Officer Hans Dieter Poetsch said today at a press conference in Stuttgart, Germany. That said, there’s “no reason to depart from the original plan.”
Porsche, which plans to complete the sale by May 30, aims to cut debt to about 1.5 billion euros with the proceeds. Net debt at Porsche’s holding company increased to 6.34 billion euros as of Dec. 31 from 6.05 billion euros on July 31 because of tax repayments.
The two car manufacturers agreed to combine in August 2009 after Porsche racked up more than 10 billion euros of debt in an unsuccessful attempt to gain control of VW. European stocks advanced today, halting a six-day slide, amid speculation Group of Seven nations will move to calm markets after Japan’s earthquake-induced nuclear crisis.
‘Window of Opportunity’
“It would be premature to say we can’t proceed with the stock sale only because the market is down,” said Michael Tyndall, a London-based analyst at Barclays Capital. “They got a window of opportunity and the message today was fairly clear: We’ll go ahead with it.”
Porsche preferred shares rose as much as 3.7 percent, or 1.85 euros, to 52.55 euros and were trading at 52.35 euros as of 2:40 p.m. in Frankfurt, valuing the sports-car maker at 9.2 billion euros. VW’s preferred shares were up 0.8 percent.
Wolfsburg, Germany-based Volkswagen now owns 49.9 percent of Porsche’s carmaking operations. Proceeds from the share sale will help pay back a 2.5 billion-euro bank loan expiring at the end of June.
“Porsche intends to use the target issue volume to significantly improve its net liabilities,” Poetsch said. Cutting debt “is a prerequisite for the merger.”
Orders at Porsche’s car-making operations are “high” at the start of 2011 as demand for models such as the Cayenne sport-utility vehicle and Panamera sedan is “undiminished,” Matthias Mueller, the unit’s chief executive officer, said.
Porsche has moved its Japanese headquarters from Tokyo to the Nagoya area, Mueller said. The automaker, which buys transmissions from Aisin Seiki Co., expected to sell more than last year’s 3,000 vehicles in the country, he said. Even as supply chains are intact, it’s too soon to gauge the impact of the earthquake on future deliveries.
“I’m not ruling out that we will run into problems too,” VW Chief Executive Officer Martin Winterkorn, who also runs Porsche’s holding company, said. “At the moment, it doesn’t look like it, at least not in the near-term period.”
Full-year revenue at Porsche’s auto-making division may exceed last year’s levels, according to Mueller. The carmaker posted record revenue of 3.87 billion euros for the August to December period. Porsche’s holding company expects another profit in 2011, Poetsch said.
The merger, originally scheduled for completion in the second half of 2011, will probably be delayed into next year because of German legal obstacles. An investigation into share- price manipulation allegations will likely push the deal’s completion into 2012, Porsche said Feb. 24.
Short sellers of VW stock have sued Porsche in the U.S., claiming the carmaker secretly piled up VW shares and later caused the investors to lose more than $1 billion. At the same time, institutional investors in Germany are seeking 2.5 billion euros in damages over the matter.
“Of course, we have not cleared all hurdles yet,” Poetsch said. “However, we can underscore that Porsche assumes that it will be possible to successfully clarify the current uncertainties and that the merger will be able to go ahead, even if this is after 2011.”
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