How Volkswagen became the owner of Porsche

Interestingly, Porsche itself repeatedly tried to acquire Volkswagen after making big money on sales of the new Cayenne model. But due to the financial crisis of 2009, there was no money to buy a 75% stake in Volkswagen from Porsche. Moreover, Porsche managed to get into debt worth 10 billion euros. However, Volkswagen in the crisis did not experience much trouble, and the decline in its production was minor. First, because he’s a longtime sales leader in Europe, and second, because his cars are gaining popularity in third world countries.

Therefore, in 2009, Volkswagen’s management suggested that Porsche shareholders sell the company and pay its debts. But the amount requested for Porsche turned out to be grossly inflated. So negotiations dragged on for the whole of 2009. In December 2009, Volkswagen finally managed to agree to buy a 49.9% stake in Porsche for €3.9 billion. To raise such a sum, VW had to sell 135 million of its non-voting preferred securities. Porsche directed a portion of the proceeds to pay off its debts to the banks.

In early 2011, following the merger plan, Volkswagen acquired Porsche’s dealership network for 3.3 billion euros, which was the largest in Europe and held the exclusive right to sell all Volkswagen vehicles in Austria, as well as in Central and Eastern Europe.

For the final purchase of Porsche, the Volkswagen firm lacked a 50.1% stake with a total value of 4460 million euros. For Volkswagen, this is not a critical amount and Porsche shareholders were fine with it. But there was a serious threat – if the merger was carried out as planned, meaning in 2014, taxes would increase to €1 billion from both firms. And this will significantly reduce the benefit of the acquisition of Porsche. But lawyers found a way out of that provision and accelerated the deal.

Volkswagen’s firm will buy back a 50.1% stake from Porsche and receive an additional common share. This would present the deal as a restructuring of both companies and thereby legally lower the taxable base. The transaction is scheduled to be fully completed by August 1, 2012. As a result, the German sportcar manufacturer will become 100% owned by VW and the tenth brand under its control. Already, both companies have one president and CFO, but the completion of the deal is legally not yet finished, creating some complexities and risks to cooperation.

For fans of both car brands, it is reported that Porsche will not lose its exclusivity as a result of the deal, and Volkswagen will replenish its lineup with several sports and luxury cars.

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