Porsche SE, the holding company controlling a majority stake in Volkswagen AG (VOW) after a botched takeover attempt four years ago, will probably soon be investing more in energy than in sports cars like the iconic 911.
Porsche SE shareholders voted today in favor of changes in the Stuttgart, Germany-based company’s charter as it closes in on finalizing the sale of the Porsche car-making unit to VW. The vote allows the holding company to invest in materials for the auto industry, real estate and energy trading.
“The focus would be on activities along the automotive value chain,” Martin Winterkorn, who is the chief executive officer of both VW and Porsche SE, said in a speech at the meeting ahead of the vote. “Porsche SE is and remains inseparable from the automotive industry.”
Without new investments, Porsche SE would be reduced to managing 50.7 percent of Volkswagen common shares after the sale of the Porsche car brand. The deal, which cleared an important hurdle earlier this month, would cap a takeover saga that divided the heirs of company founder Ferdinand Porsche, who created of the VW Beetle.
If VW exercises options to buy the 50.1 percent of the sports-car unit it doesn’t already own, Porsche SE could have about 2.5 billion euros ($3.1 billion) in cash after deducting debt. The company is slated to get about 570 million euros in dividends from VW next year, according to Bloomberg data.
The sale of the Porsche car business, which also makes the Cayenne sport-utility vehicle and Panamera four-door coupe, is part of a 2009 agreement to integrate the companies. The original plan to merge VW and Porsche SE was called off in September because of legal tangles. Since then, the companies have been mulling alternatives, including buying the rest of the Porsche brand to fold into VW.
“What is clear is that all parties concerned would benefit from a rapid combination of Volkswagen and Porsche,” Winterkorn said. “The integrated automotive group of Volkswagen and Porsche is a certainty.”
Investors are suing Porsche SE in the U.S. and Germany, accusing the company of misleading them about plans to take control of Volkswagen in 2008. There are five suits pending at a court in Braunschweig, Germany, with plaintiffs seeking a total of more than 4 billion euros in damages. A hearing in some of the German cases is scheduled for June 27. Porsche SE has denied the allegations.
The legal risks and the uncertainty over Porsche SE’s future have weighed on the shares. Over the past 12 months, the stock has fallen 25 percent, compared with a 12 percent decline for VW. Porsche preferred shares fell 1.4 percent today in Frankfurt trading to close at 39.76 euros.
Volkswagen has resolved tax issues facing the transfer of Porsche auto shares with German finance authorities, Hans Dieter Poetsch, chief financial officer of VW and Porsche SE, said at the meeting. The agreement eliminates the risk of a potential 1 billion-euro tax bill. Volkswagen, which already owns 49.9 percent of the Porsche auto business, can exercise options to buy the rest from Nov. 15 for 3.9 billion euros.
That cash inflow would give Porsche SE a war chest for investments. Net debt totaled 1.51 billion euros at the end of March. It received 331 million euros in dividends from Volkswagen in April. Porsche plans to pay 232 million euros in dividends to common and preferred shareholders.
Holders of the common stock, of which the Porsche and Piech families own 90 percent, voted unanimously today to allow the holding company to invest in new business fields, including renewable energies and auto materials. The remaining 10 percent of the common shares is held by Qatar Holding LLC.
VW bought an 8.2 percent stake in SGL Carbon SE (SGL), vying for control of the company with Bayerische Motoren Werke AG (BMW) to secure access to carbon fiber, which can reduce vehicle weight and therefore improve fuel efficiency.
Porsche SE’s investment proposal hasn’t been warmly received by investors in the company’s listed preferred shares, which don’t have voting rights.
“If the Porsche family wants to invest in these areas, they should do it privately,” Arndt Ellinghorst, a London-based analyst with Credit Suisse. “The dividends from the VW holdings should be forwarded to the shareholders. The option to invest in such a wide range of fields is definitely not in the interest of Porsche SE’s shareholders.”
The company’s 2008 effort to take over Volkswagen, which makes more cars in a week than the sports-car maker does in a year, split the controlling family. Ferdinand Piech, VW’s chairman, crossed his cousin Wolfgang Porsche to thwart the plan, which ultimately fell apart after Porsche’s debt rose to more than 10 billion euros in the midst of the financial crisis.
Piech, 75, the former VW CEO who was elected to a third term as chairman in April, has since solidified control of Volkswagen. His wife, Ursula, took a seat on the Wolfsburg, Germany-based company’s supervisory board earlier this year. In April, VW agreed to acquire Italian motorcycle maker Ducati, fulfilling Piech’s vision of a company with a range spanning from two-wheelers to 50-ton trucks.
Still, the adjustment to the scope of Porsche’s business doesn’t change the fact the company’s fortunes rest with VW’s car business, said Juergen Meyer, a fund manager with SEB Asset Management in Frankfurt.
“Porsche SE’s charter changes have as little significance to shareholders as the acquisition of Ducati,” said Meyer. Porsche is his fourth-largest holding.
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