Porsche Makes Tactical Defensive Bid for VW

30 March 2007

WOLSBURG, Germany: In a maneuvre designed to ring-fence Volkswagen from foreign predators, Porsche, the world's most profitable carmaker, has upped its stake in VW to 30.94% - a level that legally obliges it to make a full takeover bid. The offer values VW at €35.8 billion ($47.72bn; £24.34bn).

Informed sources say that Porsche has no desire to succeed in its fullscale bid. It is seen simply as a blocking tactic to prevent foreign takeover attempts while a European Union court rules on the validity of an extant German law that prevents a takeover of the national icon.

The Porsche move was stage-managed by VW chairman Ferdinand Piëch, whose family controls Porsche via a tranche of preference shares. The sportscar-maker is also dependent on VW for many of its spare parts.

Opines London-based analyst Stephen Pope: "With just shy of one-third of the company under Porsche control, it is an effective corporate coup d'état. This will secure the flow of parts supply to Porsche and allow Ferdinand Piëch to further fashion VW into his desired form."

Eric-Alain Michelis, an automobile analyst at Société Générale in Paris, sees the bid from a different angle, deeming it "a bit of a defensive move".

The Porsche and Piëch families, believes Michelis, "were afraid that some financial institutions could take big stakes in the company and force them, Porsche, to launch an offer at a much higher price."

Data sourced from New York Times/Bloomberg News; additional content by WARC staff