Porsche Plans to Acquire 20 Percent Stake in Volkswagen

BERLIN September 23, 2995; Geir Moulson writing for the AP reported that Porsche AG said Sunday it plans to acquire a stake of about 20 percent in Volkswagen AG, a move aimed at strengthening ties between the automakers and preventing a future hostile takeover of Volkswagen.

Porsche said Volkswagen has become "a significant supplier for about 30 percent of our sales volume" as well as "an important partner in development."

The two companies worked together to develop Porsche's Cayenne sport utility vehicle and Volkswagen's Touareg. They recently announced that they, along with Audi AG, were forming an alliance to develop hybrid engines.

"With this engagement, we want to secure our business relations with VW and also safeguard in the long term a significant part of our future planning," Porsche chief executive Wendelin Wiedeking said in a statement.

Stuttgart-based Porsche said it hoped the investment would enable it to head off any future hostile takeover of Volkswagen by investors "who do not have the longterm interests of VW as their aim."

That scenario could arise if the European Court of Justice rules against a German law that effectively prevents the company, Europe's largest automaker, from such a takeover.

"Our planned investment is the strategic answer to this risk," Wiedeking said. Porsche said it was in contact with Volkswagen's management.

The European Commission took Germany to court last year over the VW law. It has long argued that the decades-old law goes against the grain of the 25-nation bloc's single market principles, although German politicians claim it helps ensure stability at the company.

The Commission objects to provisions of the 1960 law privatizing Volkswagen that cap a shareholder's voting rights at 20 percent, regardless of the number of shares held, and requires a majority of 80 percent for "important decisions."

The state of Lower Saxony, where VW's Wolfsburg headquarters is situated, is currently the biggest shareholder, with a stake of 18.2 percent.

A 20 percent stake would currently cost Porsche more than $3.6 billion.

Porsche said its investment would not reach the 30 percent threshold that, under German law, would require it to make a public takeover offer for Volkswagen.

Volkswagen shares rose late last week amid rumors that a large investor was building up a stake in the company. On Friday, they closed up 3.4 percent at $62.49.