Porsche to increase its VW stake

26 March 2007

The world''s most profitable carmaker, Porsche plans to raise its stake in Europea''s largest carmaker, Volkswagen (VW), from 27.3 per cent to 31 per cent, but has said it was not keen on a complete takeover.

Under German law that protects Volkswagen from takeover, Porsche will have to bid for all of VW once its stake exceeds 30 per cent. Under the "Volkswagen Law", a shareholder in VW cannot exercise more than 20 per cent of the firm''s voting rights, regardless of the level of stock holding.

To circumvent this, Porsche is offering a low price for the shares. Porsche say it would only offer the minimum amount legally required for it to acquire the shares, which analysts say could be approximately 15 per cent below last week end''s closing price.

In a preliminary ruling, the European Court of Justice said that the law breaks EU rules, and a full judgement to that effect is expected later this year. If the legal protective umbrella is revoked, VW would be vulnerable to a possible foreign takeover.

Commentators say Porsche is moving in to increase its stake in VW at this time only to pre empt a possible rival from making a bid on VW, which also owns Audi, Skoda and Seat..

Porsche is expected to start buying the extra 3.7 per cent of VW shares from today.