Despite Porsche's continuing financial troubles, largely a result of a €9bn debt pile built up as a result of the attempt to get its hands on VW, it had looked as though the acquisition was a done deal. The €8bn that would have come Porsche's way once the papers were finally signed would have more or less cleared its debts, as well as giving it a 75% stake in VW, a giant which makes over 6m cars a year in comparison to Porsche's 100,000 or so.
Pretty sweet, huh? That's certainly what Porsche CEO Wendelin Wiedeking seemed to think – he has single-mindedly pursued the purchase for the last four years. But now with the chequered flag in sight, it emerges that completing the deal could land Porsche with a £3bn tax bill – more than enough in the current economic climate to put the kybosh on the whole thing.
The potential liability apparently arises due to tax regs which could prevent the spinning off of Porsche's car division from the holding company, created as part of the bid pursuit, without incurring a substantial penalty. On such mundane technicalities the dreams of men are sundered.
If true, this is very bad news for Porsche - already badly hit by the recession, thanks to plummeting sales and the burden of all that debt. Earlier this year it even teetered on the brink of administration, and last month it went cap in hand to Qatari sovereign wealth fund QIA looking for a cash injection, as reported here by MT.
This already-dramatic story is given added piquancy by the numerous personal and family rivalries involved – German business, and the car industry in particular, being a surprisingly rich fund of such feuds. If Shakespeare were alive today, he might well be following the tale with interest.
VW is controlled by two rival family shareholder groups, each headed by a grandson of the founder Ferdinand Porsche (whose son Ferry also happened to found the eponymous sportscar firm). Ferdinand Piech, the chairman of the VW supervisory board, is one, and Wolfgang Porsche - who also sits on the VW board as well as being chairman of Porsche - is the other (keeping up at the back?).
Between them these two control all the voting shares in VW, despite the fact that Porsche (the company) already owns 51% indirectly. Thanks to the so-called Volkswagen Law, no less than 75% is required for a controlling stake. All of which looks a bit rum to the eyes of anyone more used to the Anglo-Saxon model of governance, but it seems to work OK for the Germans.
Wolfgang Porsche favoured Wendelin Wiedeking's takeover plan; indeed, he may have been its ultimate author. Piech, however, has become increasingly outspoken in his criticism of it. Now the wheels seem to have come off, and Porsche is facing an end to its cherished ‘independence’, poor old Wiedeking's position is looking increasingly tenuous.
The outcome of this Thursday's meeting to discuss the situation is predicted to be that the two firms will simply swap places, with VW taking over Porsche instead of the other way round. An admirably untaxing solution to an extremely complicated story...
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