Volkswagen merger with Porsche delayed due to legal obstacles

Article by Christian Andrei, on September 10, 2011

Volkswagen AG will postpone a move to merge with Porsche Automobil Holding SE to a date after 2011 as it attempts to resolve its legal issues and as it finds other methods to create an integrated auto group. In 2009, Porsche and Volkswagen had an agreement to finalize a merger deal by the end of 2011.

But last February, it was announced that the merger is being delayed due to investor lawsuits and a criminal probe of Porsche's former CEO and its finance head. Last Thursday, Volkswagen released a statement that after talks with Porsche, it has come to the conclusion that the planned merger with Porsche SE can’t be executed in the time frame cited in the comprehensive agreement.

Porsche also released a separate statement, explaining that the two companies can’t agree on the valuation of Porsche SE necessary for computing the exchange ratio.

In addition, Volkswagen said that in the next several weeks, its board of management will examine if there are other possible courses of action to attain the target to making an integrated automotive group with Porsche. VW said that the outcome of this study will be shown to the supervisory board before the year ends.

VW added that the primary reasons for uncertainty are the current legal actions that Porsche SE faces in Germany and the U.S. for supposed market manipulation.

The automaker said that from its perspective, the ongoing legal obstacles make it impossible to gauge the economic risks of a merger and hence, to perform the valuation of Porsche SE needed to find the exchange ratio. Last Thursday, Porsche SE said that it believes the allegations cited in the probe and the damages claims brought in Germany don’t have any merit.

Topics: vw, porsche

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