Volkswagen AG appears to be ready to scrap a plan to merge with Porsche Automobil Holding SE in order to take direct control of the Porsche sports car business. As a result, investors are robbed of their only reason to own stock.
What’s at stake is the ownership for Porsche SE's crown jewel. Analysts estimate that the majority control of the Porsche sports car marque could generate 1 billion euros ($1.37 billion) in cash each year and industry-leading margins of approximately 20%.
Until Thursday, Volkswagen had been prepared to enter a merger with the Porsche SE holding at possibly unfavorable terms this year. In exchange, it will get the keys to the operating business and an extra 700 million euros in added yearly synergies.
VW threw out that deal last Thursday due to unquantifiable legal risks, such as a criminal investigation into the holding's former management team, says Autonews. The minority investors in Porsche SE may now be stuck owning non-voting shares in a holding that doesn’t have an access to underlying cashflows aside from annual dividends.
They have actually been hoping to swap their discounted stock for shares in Volkswagen. An analyst said that the merger wasn’t just delayed; it was taken off the table entirely.
This means that Volkswagen will exercise its option to purchase the remainder of the sports car business at a strike price of 3.9 billion euros before 2014 ends and Porsche will continue to be a “pure financial holding.”