An effective 42% stake in Dr. Ing. h.c. F. Porsche AG is being bought by Volkswagen AG for an amount of €3.3 billion (R37.86 billion). Porsche AG is a wholly-owned subsidiary of Porsche SE. The sale will be complete by 2011, at which point a full merger of the two companies will be considered. Should the merger not be approved then VW will buy the remaining majority shares in Porsche, leaving itself and the German State of Lower Saxony (15% owner) as the majority shareholders.
Previously Porsche had embarked on a highly ambitious plan to buy Volkswagen in what was being described as a bizarre transaction where a relatively smaller company was buying a very big one. It has happened before all over the world, even here in South Africa banking group Nedcor tried to buy its much bigger rival Standard Bank back in 1999. It failed miserably.
Porsche was unlucky to launch its bid for VW at a time when money was tight. Getting the required credit to finance the deal became increasingly difficult, so difficult in fact that it nearly sank the sports car maker. At some point the Gulf State of Qatar was being roped in to help with finances. VW is now effectively getting it out of the doldrums, but not for free.
