Vw might not issue the full amount of new preference stock allowed by shareholders

Article by Christian Andrei, on August 25, 2010

Volkswagen AG is not likely to issue the full amount of new preference stock allowed by shareholders, according to Chief Financial Officer Hans Dieter Poetsch. This ends rumors of a blockbuster takeover emerging soon.

One day after VW detailed its targets for replacing Toyota Motor Corp. as the world's top carmaker by 2018, Poetsch told analysts in London that the capital hike will be "tailored to what is necessary."

Last December, shareholders had agreed to let VW, Europe's biggest carmaker, issue up to 135 million shares by December 2014. This deal fueled talks that VW was preparing a buying binge.

At current market prices, a full issue would be worth more than 8 billion euros ($11.2 billion). However, analysts say it would probably have to be priced at a discount of up to a fifth.

Poetsch mentioned that the rights issue was required for Volkswagen to maintain a comfortable level of net liquidity, which at the end of September, stood at 13.4 billion euros. VW needs money to help finance acquisitions it already made.

Poetsche said that purchasing a 49.9% stake in sports car maker Porsche AG cost 3.9 billion and a 19.9% stake in Suzuki Motor Co. cost another 1.7 billion, Poetsch said.

Buying the 49.9% stake is a step toward full integration with parent Porsche Automobil Holding SE next year. Due to tough markets in the fourth quarter, another billion euros is tied up in liquidity.

Poetsch added that with the remaining liquidity, VW would be close to point that limits its scope for strategic developments. Furthermore, analysts expect VW to split its rights issue into two or more tranches.

Topics: vw

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