Volkswagen the world’s second largest car maker and Europe’s largest are set to buy out the remaining 50.1 per cent in Porsche to gain full ownership.
An umbrella company
According to reports from the automotive industry, Volkswagen are closer than previously reported. Before there was tax issues involved in the deal. Volkswagen are said to be considering setting up an umbrella company, this could be in order for the tax issues to be avoided. They seem to have been overcome. Private talks are currently being held with no official word coming out as of yet. Plans could be announced in two weeks if rumours are to be believed. However German tax authorities must give their go ahead if any deal is to go ahead, which will prove to be a major issue.
Lawsuit undermined Porsche’s valuation
In 2009, Volkswagen and Porsche agreed a full merge in companies by the end of last year. One of the main obstacles was a lawsuit against Porsche in the United States and Germany. Porsche’s overall valuation was not as trustworthy as some were to believe at this point following complications from the lawsuit.
Alternative to the merger deal
The original agreement saw an alternative to the merger deal whereby Volkswagen could purchase the remainder of the business for $5.2 billion. This would leave Porsche as the holding company of Volkswagen’s stock. This plan may go ahead and Volkswagen would fully control the Porsche. Porsche, as the holding company, would be responsible for upcoming lawsuits.
Any option previously agreed will not be able to be exercised until November the 15th. If this is not followed, there will be a 1 billion euro tax bill due.
Porsche shareholders at risk
It has been suggested by many experts that a merger deal would be very beneficial for both companies. They would be able to work closer together and as a team. However there are legal issues which mean that Porsche shareholders could be at risk.
In order to avoid a major tax bill, Porsche would have to be acquired by Volkswagen before 2014 and set up a holding company that controls the purchased stake of the company.
Volkswagen’s sport / luxury brands of Audi, Lamborghini and Bugatti all produce vehicles that equate to more than Porsche do in one year.
If Volkswagen do manage to bring about a deal for both companies to merge, it will mean that a great deal of money could be saved.