Vw’s merger with Porsche SE unlikely to be derailed by U.S. investor lawsuits

Article by Christian Andrei, on November 10, 2010

The German state shareholder with veto power says that Volkswagen AG’s merger with Porsche SE is not likely to be hindered by U.S. investor laws, even though the merger’s completion 2010 completion seems “doubtful.”

Lower Saxony Prime Minister David McAllister, in an interview in Berlin, considers the process to be complicated but that the judicial and financial risks from the U.S. are manageable.

He believes that in dealing with this matter, the state has to be cautious and thorough rather than be hasty. He adds that the government has scrapped plans to sell any VW shares in 2011 due to better-than-expected tax revenue estimates.

McAllister took the helm of the state that has 20 percent of Wolfsburg-based VW’s common stock.

The merger is also being impeded by deals with German tax authorities on the tax-exempt status of profits from Porshce’s options transactions. Last month, VW’s Chief Executive Officer Martin Winterkorn said the merger with Porsche planned for 2011 may be deferred until U.S. lawsuits are resolved.

In August 2009, Volkswagen agreed to join Porsche after Porsche’s debt tripled to over EUR10 billion ($13.9 billion) after a botched bid to buy Europe’s largest carmaker by securing stock through options trading.

VW has since acquired 49.9 percent of Porsche’s operating unit for EUR3.9 billion. U.S.-based short sellers of VW stock sued Porsche. These short sellers claim Porsche covertly cornered the market in VW shares and eventually caused them over $1 billion in losses. [via autonews - sub. required]

Topics: vw, porsche

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