Volkswagen and Porsche were meant to merge but the deal has been held up. A supposedly brilliant deal for both parties involved has hit a stumbling block, in form of a legal hurdle. The news has left Porsche worse off with their shares falling somewhat dramatically in the stock market.
This may have come as a surprise to many as Volkswagen has still stated their commitment to ensure that the deal goes ahead. Porsche shares were reported to fall as much as 10.8% when the news was announced.
The partnership idea came about as Volkswagen look to take steps to overtake Toyota as the world’s biggest car makers, by the year 2018. They believe that joining Porsche, the car manufacturer who have made some tremendous and iconic supercars in their time, will help the company expand in different avenues in the automotive industry.
The problems seem to stem from the year of 2008, when Porsche attempted to takeover Volkswagen didn’t work out as planned. This meant that the German based company can’t definitively asses the value of Porsche.
At the time, the previous takeover wasn’t well-planned and was directed by former management. At the time, many predicted the merge of Porsche and Volkswagen would fail. When it did, it left Porsche in a terrible position. They were billions of euros in debt, with them being left on the brink of bankruptcy. As mentioned this was foreseen by a previous management, whose actions took the automotive industry by surprise.
In order to patch up their differences and build bridges between the two, Volkswagen and Porsche decided to combine. Indeed in 2009 Volkswagen purchased the sports car section of Porsche for 3.9 billion euros.
The current merge operation is said to contain an option whereby Volkswagen can acquire the rest of Porsche operations, with the 50% being taken between November 2012 and January 2015.
Is there much chance of the merging process actually being completed? Volkswagen has stated that the chances were just 50-50. This is said to be due to legal and tax issues. There could still be a possibility that Volkswagen may decide to explore other avenues to achieve their goals. If they do, will Porsche’s business and shares may sink further. One thing is for certain, if Volkswagen and Porsche do decide to merge, it surely won’t be smooth.