vw porsche
FRANKFURT (Dow Jones)--Volkswagen AG (VOW.XE) and Porsche Automobil Holding SE (PAH3.XE) Thursday moved closer toward forging a combined automotive empire after Porsche Chief Executive Wendelin Wiedeking resigned and the sports-car maker neared a deal with a Qatari state-owned investment fund as a new major shareholder.
Volkswagen's supervisory board at an extraordinary meeting "endorsed the creation of an integrated automotive group with Porsche under the leadership of Volkswagen," Europe's largest automaker by sales said. It added that talks with Porsche to finalize the details of a combination will begin soon.
The resignation of Wiedeking and Chief Financial Officer Holger Haerter paved the way for the merger talks. Their departures increase the likelihood that Volkswagen CEO Martin Winterkorn will head the combined enterprise.
Wiedeking and Haerter were the architects of Porsche's stealth acquisition of Porsche's much larger German rival that started in 2005. Through complex stock options, Porsche bypassed disclosure rules and after about three years emerged as Volkswagen's majority shareholder with a stake of almost 51%, and options to hike its shareholding by another 20%.
"Wiedeking and Haerter have come to the conclusion that the further strategic development of Porsche ... is better off, if they are not on board," Porsche said in a statement, noting that Wiedeking and Haerter "see that step as a significant contribution to the appeasement of the situation."
Following some controversial remarks about Volkswagen and ambiguous signals about their strategic goals, the two executives had come under fire from VW's influential supervisory board chairman and Porsche co-owner Ferdinand Piech, VW's powerful labor unions and the German state of Lower Saxony, which can block important decisions at the Wolfsburg-based automaker through its stake of 20.1%.
Porsche said Wiedeking accepted a compensation package of EUR50 million for his contract that was due to expire in 2012. Haerter will receive EUR12.5 million. Neither executive was available for comment Thursday.
Wiedeking said in a statement that he will donate a substantial amount of money to social projects and charities, including one he plans to create for Porsche employees near the company's headquarters in Stuttgart-Zuffenhausen.
The tables turned on the two men earlier this year after credit markets turned anemic and Porsche's net debt ballooned to EUR10 billion amid the financial crisis. Volkswagen came to the rescue of its suitor, granting Porsche a EUR700 million loan in March after its struggled to secure enough financing from its banks.
Volkswagen now plans to gradually build up a stake in Porsche's core sports-car operations with the final goal being a merger with Porsche's holding company. Lower Saxony's governor, Christian Wulff, said the merger should be completed in the middle of 2011.
Porsche is set to become the 10th brand of Volkswagen, but it will remain largely independent with its head office in Stuttgart, Volkswagen said.
Volkswagen in recent weeks pushed to take over Porsche's core sports-car operations and integrate them as its 10th brand alongside such name plates as Audi, Bentley and Skoda. But Wiedeking instead rushed to hammer out a deal with the Qatar Investment Authority to shore up the company's balance sheet and safeguard its independence.
Wulff said that Qatar will take a 17% stake in Volkswagen by acquiring share options held by Porsche. A spokesman for the Qatari fund declined to comment.
Getting an Arab investor on board as a new anchor shareholder mirrors a move by German rival Daimler AG (DAI). Abu Dhabi's Aabar Investments PJSC (AABAR.AD) in March became the largest shareholder in Daimler when it paid EUR1.95 billion for a 9.1% stake.
Porsche's supervisory board during its meeting approved a plan initiated by Wiedeking for a capital increase of at least EUR5 billion and unanimously backed talks with Qatar over taking a stake.
With Qatar taking almost all of Porsche's options on Volkswagen stock, Porsche's owner families are set to take the largest chunk in Porsche's planned capital increase.
Volkswagen's supervisory board at an extraordinary meeting "endorsed the creation of an integrated automotive group with Porsche under the leadership of Volkswagen," Europe's largest automaker by sales said. It added that talks with Porsche to finalize the details of a combination will begin soon.
The resignation of Wiedeking and Chief Financial Officer Holger Haerter paved the way for the merger talks. Their departures increase the likelihood that Volkswagen CEO Martin Winterkorn will head the combined enterprise.
Wiedeking and Haerter were the architects of Porsche's stealth acquisition of Porsche's much larger German rival that started in 2005. Through complex stock options, Porsche bypassed disclosure rules and after about three years emerged as Volkswagen's majority shareholder with a stake of almost 51%, and options to hike its shareholding by another 20%.
"Wiedeking and Haerter have come to the conclusion that the further strategic development of Porsche ... is better off, if they are not on board," Porsche said in a statement, noting that Wiedeking and Haerter "see that step as a significant contribution to the appeasement of the situation."
Following some controversial remarks about Volkswagen and ambiguous signals about their strategic goals, the two executives had come under fire from VW's influential supervisory board chairman and Porsche co-owner Ferdinand Piech, VW's powerful labor unions and the German state of Lower Saxony, which can block important decisions at the Wolfsburg-based automaker through its stake of 20.1%.
Porsche said Wiedeking accepted a compensation package of EUR50 million for his contract that was due to expire in 2012. Haerter will receive EUR12.5 million. Neither executive was available for comment Thursday.
Wiedeking said in a statement that he will donate a substantial amount of money to social projects and charities, including one he plans to create for Porsche employees near the company's headquarters in Stuttgart-Zuffenhausen.
The tables turned on the two men earlier this year after credit markets turned anemic and Porsche's net debt ballooned to EUR10 billion amid the financial crisis. Volkswagen came to the rescue of its suitor, granting Porsche a EUR700 million loan in March after its struggled to secure enough financing from its banks.
Volkswagen now plans to gradually build up a stake in Porsche's core sports-car operations with the final goal being a merger with Porsche's holding company. Lower Saxony's governor, Christian Wulff, said the merger should be completed in the middle of 2011.
Porsche is set to become the 10th brand of Volkswagen, but it will remain largely independent with its head office in Stuttgart, Volkswagen said.
Volkswagen in recent weeks pushed to take over Porsche's core sports-car operations and integrate them as its 10th brand alongside such name plates as Audi, Bentley and Skoda. But Wiedeking instead rushed to hammer out a deal with the Qatar Investment Authority to shore up the company's balance sheet and safeguard its independence.
Wulff said that Qatar will take a 17% stake in Volkswagen by acquiring share options held by Porsche. A spokesman for the Qatari fund declined to comment.
Getting an Arab investor on board as a new anchor shareholder mirrors a move by German rival Daimler AG (DAI). Abu Dhabi's Aabar Investments PJSC (AABAR.AD) in March became the largest shareholder in Daimler when it paid EUR1.95 billion for a 9.1% stake.
Porsche's supervisory board during its meeting approved a plan initiated by Wiedeking for a capital increase of at least EUR5 billion and unanimously backed talks with Qatar over taking a stake.
With Qatar taking almost all of Porsche's options on Volkswagen stock, Porsche's owner families are set to take the largest chunk in Porsche's planned capital increase.
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