Porsche to tighten its grip on VW through assets sale

 

The Porsche and Piech families plan to sell their main car assets to Volkswagen (VW) under a plan that would tighten the Porsche group's grip on Europe's biggest car maker, according to two people familiar with the matter.

The families, which control at least 51 percent of Wolfsburg, Germany-based VW, intended to sell the Austrian Porsche Holding unit and the Porsche AG manufacturing division to VW in return for cash and VW shares, said the people, who declined to be identified because the plan was confidential.

As part of the transaction, Porsche will issue new shares, a portion of which may be sold to external investors.

The asset sale would allow Porsche to achieve its aim for greater control of VW, while preserving cash and giving it funds to repay rising debt, the people said earlier this month.

Stuttgart, Germany-based Porsche was struggling to raise the financing needed to reach its goal of obtaining 75 percent of VW, said the sources.

One driving motivation is that VW, being the largest volume producer in the European space, has tremendous cost efficiency that could be married to Porsche's discipline and lean production capacity, said Stephen Pope, the chief global strategist at Cantor Fitzgerald in London.

Representatives from both Porsche and VW declined to comment.

The deal would result in the creation of a major automotive holding company spanning cars, trucks and luxury vehicles, the people said.

The Porsche and Piech families together control half of the Porsche group. Porsche AG is the operating unit that makes the 911 sports car and competes with BMW.

Austrian Porsche Holding is Porsche's eastern European distribution division.

Source: Bloomberg