August 13, 2009

VW, Porsche iron out merger details

Volkswagen said Thursday it has worked out a merger agreement with fellow German automaker Porsche.

Volkswagen's supervisory board, meeting in extraordinary session, approved the comprehensive agreement that will bring the sports car maker under a 10-brand umbrella while preserving Porsche's independence, VW officials said in a release. Porsche AG has been assigned an overall value of 12.4 billion euros ($17.6 billion).

Factoring in Porsche's debt load, Volkswagen will initially pay 3.3 billion euros ($4.7 billion) for a 42 percent stake in Porsche AG by the end of 2009, with the Porsche family selling its shares in Porsche Holding Salzburg, valued at 3.55 billion euros ($5.03 billion) to Volkswagen in 2011.

Volkswagen said financial and other details for implementing the merger will be finalized in the coming weeks. The agreement also must pass regulatory muster.

Volkswagen said adding Porsche to its stable of vehicle offerings ultimately will increase its annual operating profit by 700 million euros ($992 million).

Volkswagen said it plans to issue new preferred shares in the first half of 2010 to finance the takeover.