Volkswagen Considers Speeding Up Integration Of Porsche Brand

Volkswagen AG (VOW.XE) is considering to take over the remaining 50.1% stake it doesn't already own in Porsche Automobil Holding SE's (PAH3.XE) core sportscar unit ahead of the time slots defined in the initial merger agreement to speed up the integration into its stable of brands and reap more cost synergies, three people familiar with the situation said.

But a final decision hasn't been made yet as the evaluation of possible alternatives and related tax payments is still continuing, the people said.

As part of a complex agreement signed in August 2009 to forge a joint company, Europe's largest auto maker and Porsche's holding firm mutually granted each other put and call options for a possible slice of Porsche's sportscar business if the decision on a fully-fledged merger can't be reached by the end of 2011 as initially planned.

Porsche's holding firm can exercise the put option to sell the remaining 50.1% of its sportscar business, which is folded into a company called Zwischenholding GmbH, between Nov. 15, 2012, and Jan. 14, 2013, or between Dec. 1, 2014, and Jan. 31, 2015.

Volkswagen can exercise the respective call option to buy the remaining 50.1% stake in Zwischenholding GmbH between March 1, 2013, and April 30, 2013, or between Aug. 1, 2014, and Sep. 30, 2014.

A key aspect of the current evaluation is, however, a potential tax payment of about EUR1 billion if Volkswagen and Porsche go ahead with the deal before mid-2014.

German weekly Der Spiegel said in an advanced report to be published Monday that Volkswagen is considering an acquisition of the remaining 50.1% stake in Porsche's sportscar business for EUR3.9 billion through a separate holding firm to avoid the tax payment.

"We're currently working intensively on examining possible alternatives...that would allow all involved parties to achieve the goal of creating an integrated automotive company with Porsche under economically viable conditions in a timely manner," a spokesman for Volkswagen said. "We don't comment on speculation about details and a possible timeframe."

In September last year, Volkswagen and Porsche announced that the decision on a full merger including Porsche's holding firm can't be made by the end of 2011 as initially planned, as the financial risks related to lawsuits in the U.S. and Germany were impossible to quantify. Several international investment funds accuse Porsche of cornering the market in 2008 during its ill-fated takeover attempt of Volkswagen, which backfired when credit markets dried up and led to the departure of Porsche's previous management.

-By Christoph Rauwald and Eyk Henning, Dow Jones Newswires; +49 69 29 725 512; christoph.rauwald@dowjones.com

Porsche Automobile (PK) (USOTC:POAHY)
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