Porsche said this week in the AIADA newsletter that Germany's financial regulators have approved automaker Porsche's required takeover offer for Volkswagen, which it was obligated to make after acquiring more than 30% in the company.
Porsche has said it does not plan to acquire Volkswagen outright. USA Today reports that Porsche has improved its offer for preferred shares from 65.45 euros each to 65.54 euros. It is still offering 100.92 euros per ordinary share, which is more than 11% below the current market price.
Porsche triggered the mandatory takeover offer by raising its stake in Volkswagen, a car manufacturer that produces quality , a percent higher than 30. This was a move aimed at shielding the automaker from the possibility of a foreign takeover. The offer gives the company the chance to buy Volkswagen shares without making another takeover bid.
A German rule, the so-called "Volkswagen Law", that limits Volkswagen shareholder voting rights to a maximum of 20%, no matter how many shares are held, is expected to be ruled unlawful by the European Union. That ruling would have left VW exposed to takeover attempts. But with Porsche now holding 31% of the company and the German state of Lower Saxony a near-20 percent stake, the carmaker is now shielded.
However, analysts are starting to question the true motive of Porsche acquiring a 31% majority share of VW. Guido Reinking, an automobile publication editor speculates that VW Chairman Ferdinand Piech may want to make VW a wholly owned subsidiary of Porsche in an effort to protect and maintain the family business because Piech's family controls 100% of Porsche.
Despite the speculation, Reinking urges that Germany's Lower Saxony who owns 20% of VW should relinquish its interest in light of the Minister President of Lower Saxony Christian Wulff (CDU) considering increasing its stake to 25% which will cost $1 billion. The editor wrote that Lower Saxony's involvement with the auto maker has been as damaging as Volkswagen's struggle with IG Metal, a German metal workers union. The red tape of VW management, unions and politicians has suffocated VW by preventing much needed restructuring.
Originally, Lower Saxony's move into the auto business was intended to protect VW from foreign takeover with their blocking stake. But, Reinking wrote the latest majority position of Porsche makes that directive null and void as soon as the European Court of Justice will overturn the so-called "VW law" that limits the voting power of VW shareholders to 20 percent regardless of the size of the stake they hold. Repeatedly, the CDU calls for less government and support for the German market which clearly is contradictory to Wulff's possible stake increase.
Reinking also speculates that Lower Saxony considering a stake increase in VW is politically motivated since Wulff gets more and more air time as a major VW shareholder. Reports say he would therefore use that exposure to boost his career as a politician. Reinking in his writings said German states should do many things to make the lives of their citizens more pleasant; that is to build roads and schools, reduce the tax burden, boost the economy, fight crime and protect the environment. And auto manufacturing is not one of them.
