Vw’s decision to take control of Porsche seen as positive by analysts

Article by Christian A., on July 10, 2012

Analysts have good things to say about Volkswagen Group's decision to have total control of Porsche Automobil Holding SE's manufacturing segment. VW has announced that it will purchase the 50.1% of Porsche SE's automotive business that it doesn’t yet own. VW will make the acquisition for 4.46 billion euros ($5.6 billion), concluding a seven-year takeover dispute that involved two very powerful German families.

Because of this agreement, Volkswagen can already place the Porsche automaking business fully into its group of brands, which include sedans from Audi and Bentley, the volume models of Skoda and Seat, and Ducati motorbikes.

What’s left then is Porsche SE, which the Piech-Porsche family controls with its 50.7% of VW's common stock. Christoph Stuermer, an IHS Automotive analyst in Frankfurt, said that Volkswagen and Germany stand to benefit from having the Porsche clan as owners and the anchor shareholder.

He added that this has made changes to the company’s “cultural heart” as it has become significantly stronger and long-term oriented. According to Erich Hauser, a Credit Suisse analyst in London, VW has a “very positive” result since it gets 50% of an asset valued at 26 billion euros on its own books for 4.46 billion euros.

However, he thinks that a Porsche shareholder would probably “feel slightly short changed." Stuart Pearson, a Morgan Stanley analyst, said that it’s a “good deal” for VW since its earnings would probably increase by 6% in 2012.

He described Porsche as having the “best premium car story in the world.” Pearson explained that as sales volumes are nearly 20% higher than the previous record, Porsche's primary challenge is to secure enough production capacity and to achieve that, it believes that integration is necessary. VW is planning to start the assembly of several Porsche units in its own facilities.

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