The wheels are rolling towards either a merger or a buyout between Volkswagen AG and Dr. Ing. h.c. F. Porsche AG. The two companies are in agreement that VW will buy a shareholding of 42% in Porsche AG for about €3.3 billion, the 100% subsidiary of Porsche SE using cash. The amount is based on the enterprise value of Porsche AG which is €12.4 billion. There will be a cash capital increase of VW AG during the first half of 2010 when new preference shares are issued. Such a transaction will be approved by Porsche SE.

Both entities hope to have engineered a full merger by 2011 if such a move is approved by the regulatory authorities. If not then VW will exercise an option in their agreement to buy out the remaining shares in Porsche AG for a complete takeover. The State of Lower Saxony will reserve the right to appoint two members of the supervisory board as well as to maintain an ordinary shareholding of at least 15% in Volkswagen.

These new proposals may finally put an end to the saga of Porsche and VW which culminated in the "smaller" entity almost buying the bigger one. Now the roles are reversed following the departure last month of former Porsche CEO Dr. Wendelin Wiedeking and his Chief Financial Officer.


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