Porsche, VW Merger Deal May Fall Apart
Oct 31st 2010 10:21AM
Updated Oct 31st 2010 10:37AM
If you're still waiting for a merger between the parent companies of VW and sports car maker Porsche to close, don't hold your breath. VW's CEO is warning that it may not happen at all. "The chances are 70 to 30 that it comes to that," Volkswagen CEO Martin Winterkorn said in an interview with Automobilwoche on the edge of a vehicle presentation.
Winterkorn said the legal and financial aspects of the transaction may derail it. "Volkswagen has a put-call option in place that allows it to acquire the remaining 50.1% of Porsche's sports car activities for a strike price of €3.9 billion ($5.41 billion) independent of any merger. But the purchase could involve tax risks as well, should the option be exercised before the end of 2014," according to Reuters.
VW wants the transaction to add a large luxury car line. But, more is on the table than that. VW's merger with Porsche would put it one step closer to passing beleaguered Toyota (NYSE: TM) as the largest car company in the world. It would also give VW in toe hold in the US where it has had very little success. The Porsche Cayenne SUV has sold unusually well in America and the sports car company has developed lower-priced versions of the vehicle to appeal to a broader market.
The two companies agreed to merge in 2009, after Porsche attempted to gain control of VW. Porsche's finances made that impossible and triggered the transaction that was supposed to close in the next few months.