Porsche SE, the sports-car maker that plans to merge with Volkswagen AG, will start a 5 billion euro ($7 billion) share sale on March 30 to reduce debt.
The automaker's supervisory and executive boards signed off on the plan to sell shares at 38 euros apiece to current owners, Porsche said Sunday. One existing share carries the right to subscribe to 0.75 new shares. The price is a 32 percent discount to the preferred stock's close on March 25 of 56.22 euros.
Porsche, which plans to use the proceeds to cut debt to about 1.5 billion euros, last week said a timetable to sell the shares still stands amid the volatile financial markets following the Japanese earthquake.
Porsche and Volkswagen agreed to combine in August 2009 after Porsche racked up more than 10 billion euros of debt in an unsuccessful attempt to gain control of VW.
"It's not the perfect timing given how volatile the market has been in recent weeks, but they're under pressure to get this done," said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. "They're averting the much greater damage that would occur if the merger were pushed back for months."
The sale will be split evenly between preferred and common stock at 2.5 billion euros each. The common shares are controlled by the Porsche and Piech families. The subscription for the sale begins March 30 and ends April 12.
Porsche preferred shares have gained 27 percent in the last year, valuing the carmaker at 9.83 billion euros. The stock dropped 0.3 percent on March 25 to 56.22 euros.
The combination, originally scheduled for completion in the second half of 2011, will probably be delayed into next year because of German legal obstacles. An investigation into share-price manipulation will likely push the deal's completion into 2012, Porsche said Feb. 24.
Net debt at Porsche's holding company increased to 6.34 billion euros as of Dec. 31 from 6.05 billion euros on July 31 because of tax repayments. Porsche shareholders last year approved the stock sale to raise the funds.
Volkswagen now owns 49.9 percent of Porsche's automaking operations. Proceeds from the share sale will help pay back a 2.5 billion-euro bank loan expiring at the end of June.
"The company will use all of the net proceeds for the repayment of liabilities under its credit facilities," Porsche said in the statement.
Full-year revenue at Porsche's auto-making division may exceed last year's levels, Chief Executive Officer Matthias Mueller said this month. The carmaker posted record revenue of 3.87 billion euros for the August to December period. Porsche's holding company expects another profit in 2011, Poetsch said.
Short sellers of VW stock have sued Porsche in the U.S., claiming the carmaker secretly piled up VW shares and later caused the investors to lose more than $1 billion. At the same time, institutional investors in Germany are seeking 2.5 billion euros in damages over the matter. Porsche has repeatedly denied all the allegations.