Porsche, the world’s most profitable carmaker, is set to pay about €10bn to increase its stake in Volkswagen from 31% to more than 50%, giving it majority control for the first time. What makes the deal unusual is that Porsche is so much smaller than its target – VW has a market value of about €110bn, compared to Porsche’s €20bn, and makes about 60 times as many cars every year (6.2m compared to Porsche’s 100,000).
Unfortunately, that’s where the David and Goliath analogy breaks down, since (unlike the pint-sized Biblical hero and foe) Porsche and Volkswagen have actually been the best of chums for years. Porsche actually designed the first ever Volkswagen, and the two groups still do a lot of development work together. Ferdinand Karl Piech, the grandson of Ferdinand Porsche and still one of Porsche’s biggest shareholders, even chairs VW’s supervisory board (we’re guessing he voted in favour of the deal).
The two groups were quick to stress that this wouldn’t actually be a merger, and the Volkswagen brand will remain intact – as will all the other marques VW owns, including Audi, Skoda, Bentley, Lamborghini, and (as of yesterday) Swedish lorry firm Scania. Porsche CEO Wendelin Wiedeking said the aim was to create ‘one of the strongest and most innovative automobile alliances in the world’. Presumably this will make the deal a bit more palatable to the watching world than a straight-up merger – although since Porsche will have majority control it amounts to much the same thing.
Nonetheless, the PR angle’s important because Porsche still needs to get the nod from regulators. And it still needs to convince VW’s unions, who are worried about being under-represented on the board if the deal goes through. And the state of Lower Saxony could still throw a spanner in the works – it’s the second biggest shareholder in VW, and has said it wants to retain its 20% stake.
But since it was a European court ruling that made it possible for Porsche to up its stake in the first place (over-ruling a German law), it’s unlikely to run into any legal trouble. So it looks as though Wiedeking’s audacious reversing manoeuvre is going to come off...