Germany Finance Minister Hartmut Moellring revealed that Lower Saxony, the second-largest shareholder in Volkswagen AG, seeks to sell shares to help lower the budget deficit of the state government. Moellring explained however that this German state doesn't want to reduce its blocking minority of 20.01% in VW.
According to a government official, who asked to remain anonymous, the government wants to raise 200 million euros ($261 million) and to put together a deal that would maintain Lower Saxonys voting rights in VW. Under the so-called Volkswagen Law in Germany, Lower Saxony could obstruct major decisions by the carmaker. Porsches holding company owns 50.7% of VWs ordinary shares, which carry voting rights. Qatar Holding, which represents a portion of the country's sovereign wealth fund, owns 17% of the voting rights.
Moellring said that the company will keep its stake above 20%. He also said that a sale would be aimed at plugging a 1.8 billion-euro gap in Lower Saxonys 2011 budget plan. During a June 24 interview with Bloomberg, Lower Saxony Prime Minister David McAllister said that his support for the states 20% stake in VW is rock solid.
Wendelin Wiedeking, former CEO of Porsche's sports car business, had attempted to use options transactions to take over VW. But this plan failed and now, VW is proceeding to acquire Porsche's sports-car business. Last year, Porsche was prevented from achieving its plan to purchase 75% of VW due to resistance from Christian Wulff, McAllisters predecessor.
This holding would have resulted to being given access to VWs cash. Five of the six western German VW plants are located in Lower Saxony. Starting in 1960 when the company was privatized, the state has maintained a voting stake of at least 20% in the carmaker.
About eight out of every ten jobs at VW's brand's total German workforce are in the state, which is known to have had a strategic interest in maximum employment. Lower Saxony had the opportunity to cash in on its VW ordinary shares when they each traded at around 200 euros ($261.4) or more during the time that Porsche SE was hoping to acquire control of VW.