Stuttgart, Germany: Legal disputes and tax issues could delay the absorption of troubled auto holding Porsche SE by Volkswagen beyond the end of next year, the chief executive of both companies said.
“Investigations by the public prosecutor are ongoing, there are several claims filed by hedge funds in the United States, and conciliatory proceedings have been applied for in Germany,” Martin Winterkorn told a news conference.
But he brushed off concerns that these unresolved issues could scupper the planned transaction.
“Let me be quite clear about this: the integrated automotive group will happen.”
Shares of Porsche were down 2.9% to €41.47 by 01:17 pm, while Volkswagen’s preference shares were up 1.2% at €92.63, outpacing a 0.25% rise in Germany’s blue-chip index.
Porsche SE plans to carry out a $7 billion capital increase between January and June 2011 and will ask shareholders at its annual general meeting on 30 November to approve issuing up to 1.25 billion new shares for each of its two classes of stock.
The actual number of new shares to be sold can first be determined after the company has decided on the subscription price for ordinary and preferred shares, which will be identical.
“As part of the overall basic agreement, holders of ordinary shares from the Porsche and Piech families have made a commitment to approve the resolution and to subscribe to the new ordinary shares under certain circumstances,” finance chief Hans Dieter Poetsch said.
Investors will also be asked to approve the issue of a convertible bond and the creation of contingent capital and new authorised capital that will serve only to increase flexibility and not lead to a greater cash call.
“These authorisations will be of significance particularly if the direct capital increase cannot be performed on time or completely,” Poetsch explained.
Porsche SE’s creditor banks are willing to potentially delay the €2.5 billion tranche payment scheduled for 30 June of next year by up to four months.
The company, which now draws profits solely from earnings attributed to its equity holdings, is still suffering under a net debt burden of €6 billion.
Last week, Porsche SE unveiled preliminary results that showed its majority-owned sports car business drove in a near-unheard of 23% operating margin during the fiscal fourth quarter.