Porsche moves to keep VW in German hands

Ferdinand Piech, chairman of the board of Volkswagen, smiles during their general meeting in Wolfsburg, Germany, last month. Luxury automaker Porsche said Saturday, it plans to raise its stake in Volkswagen to 31 percent, triggering a mandatory offer for the whole of the company.Kai-uwe Knoth / AP
/ Source: The Associated Press

Prestige automaker Porsche will increase its stake in Volkswagen AG, maker of the Beetle, Golf and Jetta, in a widely expected move aimed at keeping the company firmly in German hands.

A spokesman for Porsche said the company did not plan to acquire Volkswagen, Europe's biggest car maker, which is partly owned by the state of Lower Saxony and is looked to as both an industrial powerhouse and a major provider of jobs.

Stuttgart-based Porsche AG, which makes upscale and expensive sports cars like the 911 and Boxster, said Saturday it would increase its stake in Volkswagen from 27.3 percent to 31 percent in the next week, a move that legally obliges it to make a mandatory takeover offer for the company.

Michael Baumann, a Porsche spokesman, said the company will only offer the legal minimum $134.50 per Volkswagen share, lower than the $156.86 VW closed at in Frankfurt trading on Friday.

"We do not expect many Volkswagen shareholders to offer us their shares," Baumann told The Associated Press. "Which means simply that we intend to go to 31 percent. We do not by any means intend to take over."

The offer is set to take place on Monday.

Volkswagen's board chairman and former CEO, Ferdinand Piech, is a member of the family that controls Porsche. He is the grandson of Ferdinand Porsche, the designer of VW's original Beetle model, and the Porsche and Piech families own more than half of Porsche's stock and voting shares.

Baumann said that the companies, which target completely different buyers, will remain separate, quashing any sentiment that upscale consumers seeking a new Cayenne will be able to go to a Volkswagen dealership to find one.

"Porsche remains Porsche," he told the AP.

In its statement, Porsche said it was seeking the larger stake as a response to fears that European Union judges will force the German government to repeal its law blocking a foreign takeover of Volkswagen.

It cited the Feb. 13 opinion of EU Advocate General Damaso Ruiz-Jarabo Colomer, who said the German government's regulation that limits any shareholder's voting rights to 20 percent was "not based on overriding reasons relating to the public interest."

The EU took Germany to court over the issue in 2005; the advocate's opinions are not binding on EU judges but the union's highest court follows them roughly 80 percent of the time.

Porsche said it assumed "that the European Court of Justice would confirm the invalidity of the VW law and so cause the German government to change or abolish this law."

German law requires that the takeover offer only be made once, not that it succeed, Baumann said. The next threshold for a mandatory takeover is 50 percent.

At 31 percent, Porsche will be Volkswagen's largest shareholder followed only by Lower Saxony, which holds 20.3 percent.

Porsche plans to form a new holding company that will make Porsche AG a wholly owned subsidiary of the new company, which will also oversee the stake in Volkswagen.

"This company will then continue the current business operations of the sports car manufacturer under the existing company name Dr. Ing. h.c. F. Porsche AG," Baumann said.

Other companies that have made the change include German insurer Allianz, Finland's Elcoteq, Swedish financial service company Nordea and Norway's Narada Europe.

Volkswagen was seemingly accepting of the Porsche move.

"The VW group and its eight brands still have high potential," said Volkswagen Chief Executive Martin Winterkorn. "I'm sure that Porsche like any other investor is making a good investment in the VW share."