Volkswagen, Europe’s biggest carmaker, and luxury auto manufacturer Porsche said on Thursday they had approved a plan to merge by 2011 and create an auto giant.
Volkswagen chief executive Martin Winterkorn becomes head of both Porsche and VW after the agreement to tie up the companies, announced by the firms’ supervisory boards.
“We have more than ever the means [to become] No. 1 in the automotive industry,” he said.
PHOTO: EPA
The merger of the car giants draws a line under a four-year battle marked by multiple twists and turns, family feuds and boardroom battles.
It marks a clear victory for VW chairman Ferdinand Piech, nicknamed “the patriarch” by German media, and the failure of Porsche’s bid to take over their far larger rivals.
Under the terms of the agreement, Volkswagen will initially buy a 42-percent stake in Porsche by the end of next year for 3.3 billion euros (US$4.7 billion), a deal that values Porsche at 12.4 billion euros, the companies said.
Volkswagen will then increase its capital in the first six months of next year by issuing new preferred shares, and Porsche will issue ordinary and preferred shares in the first half of 2011 by.
The merger deal comes after months of complex and acrimonious negotiations.
Volkswagen eked out a net profit in the second quarter despite a collapse in demand for cars because of the global economic crisis and it plans to become the world’s biggest automaker by 2018 by overtaking Japan’s Toyota.
VW’s teaming up with Porsche may bring it a step closer to this goal, as the carmaker strengthens its position as top European manufacturer, with more than 400,000 employees worldwide and an annual production of 6.4 million cars.
The group will now work to integrate Porsche as its 10th brand, alongside the Audi, Bentley, Bugatti and Lamborghini, although the companies stressed on Thursday that Porsche would remain an “independent” brand.
“The autonomy of Porsche will be guaranteed in the integrated group,” Volkswagen said in a statement.
Porsche’s supervisory board said Winterkorn would become its new chief executive while remaining boss at VW, a post he has held since 2007.
In addition, Volkswagen chief financial officer Hans Dieter Poetsch takes up the same role at Porsche.
There were no further details of the role to be played by the Gulf state of Qatar.
Winterkorn had previously announced Qatar would take a direct 17-percent stake in VW by acquiring stock options owned by Porsche.
Negotiations with Qatar would continue, Volkswagen said on Thursday.
Winterkorn said the “integrated group” would give Porsche “new opportunities for growth.”
The plan seals the failure of a gamble begun by Porsche’s management last year to take over the far larger VW in what would have been one of the most spectacular corporate operations in German history.
The deal also marks a victory for VW chairman Piech, grandson of the inventor of the VW Beetle, who has been planning the tie-up with Porsche for years.
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