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Porsche Faces $1.8 Billion Suit Over Volkswagen Options

Porsche Faces $1.8 Billion Suit Over Volkswagen Options Trades
The legal wrangling, stemming from Porsche’s bid for VW more than four years ago, ultimately scuttled a planned merger between the two companies last year. Investors claim Porsche failed to inform the markets about its takeover plan. Photographer: Hannelore Foerster/Bloomberg

May 13 (Bloomberg) -- Porsche Automobil Holding SE, already facing suits seeking a combined 4 billion euros ($5.2 billion) linked to the carmaker’s aborted takeover of Volkswagen AG, was sued by 25 more hedge funds in Germany.

The plaintiffs, including Viking Global Equities LP, Glenhill Capital LP and David Einhorn’s Greenlight Capital Inc., are seeking 1.4 billion euros ($1.8 billion), Bernhard Schabel, a spokesman for the Stuttgart Regional Court, said in an interview today. Porsche shares fell as much as 3.7 percent.

Viking, Glenhill and Greenlight were among the funds suing Porsche in New York state court over the carmaker’s use of options in its failed 2008 bid to take over Volkswagen. At the beginning of the year, hedge funds agreed not to pursue further appeals in New York and Porsche granted them a 90-day period to sue in Germany instead.

“We haven’t received the suit yet and thus cannot comment on its contents,” Porsche spokesman Albrecht Bamler said in an interview. Porsche has always denied wrongdoing.

Porsche, based in Stuttgart, dropped as much as 2.25 euros and closed at 60.28 euros, down 1.2 percent, in Frankfurt.

The new suit doesn’t add to the overall risk Porsche is facing from the litigation, since it’s merely shifting a U.S. case to Germany, said Frank Biller, a Stuttgart-based analyst at LBBW who recommends buying Porsche stock.

‘Unchanged’ Risk

“We see the risk as basically unchanged,” he said. “We have anticipated a 5 billion-euro discount on the stock and don’t see any reason to change that amount now because of the suit.”

Porsche was also able to avoid most of the litigation in U.S. federal courts. In March, Elliott International LP and 11 other hedge funds agreed to withdraw their case from the U.S. Court of Appeals in New York. At the end of April, Porsche said that an additional 12 funds dropped their claims in that court, reducing the number of plaintiffs to eight. The 12 had also sued at the New York state court.

The legal wrangling, stemming from Porsche’s bid for VW more than four years ago, ultimately scuttled a planned merger between the two companies last year. Investors claim Porsche failed to inform the markets about its takeover plan.

Misled Investors

The hedge funds claim that Porsche misled investors by denying through much of 2008 that it intended to acquire Wolfsburg, Germany-based Volkswagen. The cases seeking more than 4 billion euros combined are pending at a court in Braunschweig, Germany. That tribunal rejected two smaller cases in September.

Stuttgart prosecutors in December charged former Porsche Chief Executive Officer Wendelin Wiedeking and former Chief Financial Officer Holger Haerter with market manipulation over the issue.

Haerter is standing trial over a related loan-fraud charge. Both men have denied the allegations. Last week, prosecutors asked a Stuttgart criminal court to sentence Haerter to a one-year suspended prison term and pay 1 million-euro fine. Haerter’s lawyer has said she is seeking an acquittal in the loan fraud case.

The Stuttgart hedge fund case is: LG Stuttgart, 25 O 95/13.

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.

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