Combined company would generate about 120 billion euros a year in sales. VW and Porsche have agreed on an outline agreement and questions of valuation have been resolved but the details still need to be worked out.

Porsche and Volkswagen have reached a tentative agreement for a merger of the two legendary German automakers. The new automotive enterprise may come to be called "Auto Union" and will likely be led by current VW CEO Martin Winterkorn.

After Porsche's failed attempt at a takeover of VW Group, and after having run up a huge debt in the process, the two automakers have come together to settle their differences and attempt to create a single car making entity with the Porsche brand remaining intact.

Under the terms in the outline agreement, VW would come to buy a 49 percent stake in sportscar-making division Porsche AG from the family-owned Porsche Holding SE, which is also a dealership group in Europe. Porsche already owns 50 percent of VW's voting stock. The combined company would generate about 120 billion euros a year in sales.

Porsche has gotten into trouble with its pursuit of VW and run up a debt of around 10 billion euros. The company is valued by analysts as being worth between 8 and 11 billion.

The German state of Lower Saxony, which owns a veto-wielding 20 percent stake in VW, is expected to retain that same share of the new automotive group.

Details still need to be worked out between the two automakers and nothing is assured. But one board member did tell Reuters that "questions over valuation have been resolved."


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