Volkswagen AG agreed to buy a stake in the sports car unit of debt-ridden Porsche Automobil Holding SE in a first step toward combining the two powerful German automakers by 2011. The following is a summary of the deal as set out so far:
Porsche AG stake
VW will pay up to about 3.3 billion euros ($4.7 billion) this year for an initial 42 percent stake in the unit, Porsche AG, which due diligence has valued at 12.4 billion euros ($17.7 billion) including expected synergy effects. VW said the purchase price factors in Porsche debt.
The automaker did not specify what role debt plays in the difference between the implied 7.86 billion euro value of Porsche AG based on the agreed purchase price and the overall valuation of 12.4 billion.
The Porsche and Piech families will sell their automobile dealership business -- Europe's largest with annual unit sales of 474,000 vehicles -- to VW by 2011. The business was assigned an enterprise value of 3.55 billion euros.
VW capital increase
VW will increase its capital in the first half of 2010 by issuing new preference shares once shareholders approve the move at an extraordinary meeting this year. VW Chief Financial Officer Hans Dieter Poetsch has said the value of the sale will be about 4 billion euros.
Porsche capital increase
Porsche SE will issue new voting and preference shares, probably in the first half of 2011. It gave no details, but sources close to the situation have said its owner families aim to raise about 5 billion euros.
VW's home state will maintain the right to veto strategic issues and to name two VW supervisory board members. This will be anchored in VW's articles of association.
The exact merger terms are to be set in time for a deal to conclude in 2011. The extended Porsche and Piech clan will remain the largest shareholders with a stake of 35 percent to 40 percent, followed by Lower Saxony. The Gulf state of Qatar is in advanced talks that could make it the third-largest shareholder in VW.
The combined company will have 10 brands, adding the Porsche marque to a stable that already includes Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini.
Should the merger not happen, VW has the option to buy the rest of Porsche AG, while Porsche SE has an option to sell the remaining 58 percent to VW.
Porsche's creditor banks and regulatory authorities have to approve the merger