Porsche buys more VW shares as takeover is delayed

BRUSSELS/STUTTGART (Reuters) -- German sports car maker Porsche suffered a minor setback in its plans to take control of Volkswagen on Wednesday, after the European Commission forced it to refile for regulatory approval.

While the one-month delay does not push Porsche off course and there remains little doubt of an approval, procedural shortcomings meant it had to agree to buy another 4.9 percent of VW's votes and threw a wrench in the arrangements that it had planned with clockwork precision.

Porsche said in its filing the agreement to raise its voting stake to 35.5 percent would grant it de facto control over Europe's biggest carmaker. That solves problems it had with its first filing based on only a 30.6 percent holding.

A spokesman for Porsche said the company expects that consultations with the antitrust authorities would now be "more effective" as a result of the purchase.

"The delay is slightly bad news, but we still expect antitrust approval," Merck Finck analyst Robert Heberger wrote in a note to clients.

EU rules say the Commission may review a deal only if a company can show an agreement or public bid for, or the acquisition of, a controlling interest.

Porsche withdrew its old application for a Commission review, which had a Wednesday deadline, then filed a new one a few hours later with a due date of July 23.

In March, Porsche's supervisory body authorized the purchase of a majority stake in Volkswagen for an investment of nearly 10 billion euros ($15.5 billion), although the cost for Porsche is expected to be a fraction of that since it hedged against the spike in VW's stock price via cash-settled derivative contracts.

State buys shares

Porsche already launched a mandatory bid last year at the absolute worst price possible under law, designed specifically to allow it to cross the 30 percent threshold at virtually no cost after only garnering about 0.06 percent of VW shares.

With the next threshold for legal disclosure at 50 percent, the failed bid allowed Porsche to map out every move out of its takeover plan protected under a shroud of opaqueness and unfettered by any further need to buy out minority stockholders.

It has, however, encountered strident opposition from Lower Saxony, which has sought to retain its strategic veto right that would protect jobs in the structurally weak region.

The German state, VW's second-biggest shareholder, has lobbied hard for a revision to the Volkswagen Law from 1960 that effectively ensures the government a blocking minority as long at it holds at least 20 percent, despite hefty objections from both Brussels and Porsche.

Earlier on Wednesday, Lower Saxony bought 500,000 shares in Volkswagen worth some 90 million euros in order to prevent the possible dilution of its stake, after VW issued employee stock options that if fully exercised would have left the state without its most important bargaining chip against Porsche.

Separately, Porsche published results for the first 10 months to May, which revealed earnings were flat as rising investments -- to develop its upcoming Panamera four-door coupe for example -- offset profit contributions from its Volkswagen stake.

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