VW targets $75 billion valuation in landmark Porsche IPO

BERLIN -- Volkswagen Group is targeting a valuation of up to 75 billion euros ($75 billion) for luxury sports-car maker Porsche -- below an earlier top-end goal of as much as 85 billion euros, with the deal going ahead at a time of deep market upheaval.

VW Group will price preferred shares in the flotation of Porsche AG at 76.50 euros to 82.50 euros per share, the automaker said on Sunday, translating into a valuation of 70 billion to 75 billion euros. At the upper end of the range, it would become Europe's third largest IPO on record, according to Refinitiv data.

"The Porsche IPO will most likely be a success... investors are queuing up. If the Porsche IPO goes well, one could imagine placing other parts [of Volkswagen] such as Audi on the stock exchange," auto expert Arndt Ellinghorst of data analytics firm QuantCo said.

The subscription period for private and institutional investors is expected to run from Sept. 20 to Sept. 28, with shares offered to private investors in Germany, Austria, Switzerland, France, Italy and Spain. Trading will begin on the Frankfurt Stock Exchange on Sept. 29, VW said.

EV financing

Total proceeds from the sale will be 18.1 billion to 19.5 billion euros. VW Group has said that proceeds from the IPO will help the automaker with financing its EV transition and investments in software.

During meetings with potential investors, VW pitched the listing as a chance to invest in a company that combines the best of carmaking rivals like Ferrari and luxury brands such as Louis Vuitton.

While Ferrari and Porsche both target wealthy buyers, Ferrari remains in a league of its own boasting industry-leading margins despite delivering a fraction of Porsche’s 300,000 annual sales.

At the mid-valuation point for the preference shares, the IPO would value Porsche at 10.2 times earnings before interest, tax, depreciation and amortization, according to Jefferies. This compares to Ferrari's EBITDA multiple of 23.1 times.

Still, Porsche's upper valuation range almost matches VW Group's total market value -- comprising Audi, Skoda, the VW brand as well as Seat -- of 88 billion euros.

Porsche is targeting revenue of as much as 39 billion euros this year and return on sales of as much as 18 percent, up two points from last year, the company said in July. Returns are to climb above 20 percent in the long term.

While interest for the IPO has been high, some investors have said the appointment of Oliver Blume, Porsche’s CEO, to the helm of VW Group and the plan for him to stay on in a dual role raises questions about Porsche’s future independence.

As part of the listing, 911 million Porsche AG shares will be divided into 455.5 million preferred shares and 455.5 million ordinary shares. Up to 113,875,000 preferred shares, carrying no voting rights, will be placed with investors over the course of the IPO.

European markets have been largely shut to IPOs for most of the year, with companies shying away from seeking new listings because of the region’s energy crisis, rising interest rates and record inflation.

Amid the stock market slump, VW Group's plan to list is getting a boost from firm commitments of key cornerstone investors. Qatar Investment Authority, Norway’s sovereign wealth fund, T. Rowe Price and ADQ are set to subscribe to preferred shares of as much as 3.7 billion euros.

"We are now in the home stretch with the IPO plans for Porsche and welcome the commitment of our cornerstone investors," VW CFO Arno Antlitz said.

Aside from offering investors a slice of one of the most recognizable names in carmaking, the IPO will hand back significant decision-making power to the Porsche-Piech family, who lost control of the sports-car maker after a protracted takeover battle with VW. Porsche tried and failed to take over VW. The attempt left Porsche debt-ridden and in 2012, VW Group took control of the sports-car business as part of a financial bailout.

To account for the interests of the billionaire family, who hold 53 percent of VW Group's voting shares via the separately listed Porsche Automobil Holding SE, the Porsche IPO is complex and has triggered governance concerns that mirror those about VW’s convoluted structure.

Investors will be able to subscribe to 25 percent of Porsche preferred shares, which carry no voting rights.

The Porsche-Piech family will buy 25 percent plus one of Porsche's common shares with voting rights, meaning they will receive a minority blocking stake and sway on future key decisions.

The family has agreed to pay a 7.5 percent premium on top of the price range for the preferred shares and plan to fund the acquisition with a mix of debt capital of as much as 7.9 billion euros and a special dividend payed out by VW.

Bloomberg and Reuters contributed to this report