FINANCIAL TIMES: "Porsche Poised to Take Total Control of VW

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FINANCIAL TIMES: "Porsche Poised to Take Total Control of VW"


Quote:

Porsche poised to take total control of VW

By Richard Milne in Frankfurt and Tobias Buck in Brussels
Published: February 13 2007 18:56 | Last updated: February 13 2007
18:56

Porsche is set to take total control of fellow German carmaker Volkswagen after the biggest opponent of Porsche’s ambitions at VW threw in the towel and European lawmakers called for an end to a law protecting VW from takeover.

Lower Saxony, VW’s second-largest shareholder after Porsche, will no longer stop the sports carmaker taking both the chairmanship and a third seat on VW’s supervisory board, its state premier has told colleagues and fellow directors.

The decision paves the way for Ferdinand Piëch, a controlling shareholder of Porsche, to remain VW chairman if he wishes, as is likely. It also means victory for Porsche, which owns 27.4 per cent of VW and has authorisation from its board to buy up to 29.9 per cent.

It ends, at least for now, one of the longest-running and most bitter sagas in recent European business history. Christian Wulff, the Christian Democrat premier of Lower Saxony, has repeatedly opposed Mr Piëch’s power-grab and once tried to oust him.

Mr Wulff had been in talks with German and foreign investors as to whether to try again in April when Mr Piëch’s term on the supervisory board is due for renewal.

But following the forcing out of Bernd Pischetsrieder, a Wulff ally, as chief executive in November shortly after Porsche raised its stake from 21 per cent, the state premier saw the situation had changed. “Wulff has basically given up the fight totally on VW,” said one person who spoke to him recently.

Many independent shareholders had opposed Mr Piëch staying on, and Porsche’s influence, as they felt the sports carmaker had taken control of VW without paying a premium, weakening corporate governance. “Wulff giving up is very sad news,” said one of the largest opponents, a top-10 shareholder.

Most analysts believe that Porsche no longer needs to launch a full takeover offer – necessary if its stake goes above 30 per cent – because it already has full control.

Meanwhile, the law that protects Volkswagen from takeovers was on Tuesday ruled illegal by the advocate general to the European Court of Justice, in a move likely to pave the way for the scrapping of the legislation later this year.

In a preliminary ruling, the advocate general said the law acted as a block on the free movement of capital because it effectively prevented “any intervention in the management of the firm”. It will now be up to the Court itself to pass judgment on the VW law, but in the majority of cases the judges follow the reasoning of the advocates general.

Copyright The Financial Times Limited 2007