Volkswagen plans Porsche spin-off in IPO

Volkswagen said it was considering splitting its profitable Porsche division into a separate company with its own stock market listing. ...


Volkswagen said it was considering splitting its profitable Porsche division into a separate company with its own stock market listing. The transaction would help the automaker raise money to invest in electric vehicles while potentially returning more control of the performance automaker to its founder’s descendants.

Preferred shares of Volkswagen, the most traded, climbed 9% on Tuesday after the company said it had traded a “framework agreementwith Porsche Automobil Holding, the investment vehicle of the descendants of Ferdinand Porsche, who founded the company in the 1930s.

The holding company, which owns 51% of Volkswagen’s voting shares, said in a statement that it may acquire shares of an independent Porsche automaker as part of the transaction. If so, the family could swap shares of Volkswagen, one of the world’s largest automakers, for a larger share of Porsche, which provides a third of the parent company’s profits.

The deal must be approved by Volkswagen’s supervisory board and could be vetoed by the Land of Lower Saxony, which has two seats on the 20-person board, and Volkswagen workers, who have of 10 seats. The transaction would generate cash that Volkswagen could use to manage a costly transition to electric vehicles, but it would also reduce the company’s share of Porsche’s profits. Volkswagen is likely to retain a stake in Porsche, although its exact size is still unclear.

Stephan Weil, prime minister of Lower Saxony and a member of Volkswagen’s supervisory board, said in a statement that he could not comment on the proposed deal.

A spin-off would be the latest chapter in a long and often strained relationship between the Porsche family and Volkswagen. Ferdinand Porsche designed the Volkswagen Beetle for Adolf Hitler in the 1930s and oversaw the construction of the huge factory in Wolfsburg, northern Germany, which remains Volkswagen’s center of operations.

After World War II, Mr. Porsche’s son Ferdinand adapted Volkswagen components to create the first Porsche sports car. Over the next few decades, Volkswagen supplied parts to the sports car manufacturer and occasionally manufactured vehicles under the Porsche brand. For example, a Volkswagen plant in Slovakia manufactured chassis and bodies for the popular Porsche Cayenne sport utility vehicles, which were finished at a Porsche plant in Germany.

Although the companies are closely related, the Porsche family did not hold a significant stake in Volkswagen. That started to change in 2005 when Porsche, flush with the Cayenne’s profits, started using derivatives to take control of Volkswagen shares.

Two senior Porsche executives were later charged, but ultimately acquitted, stock market manipulations after the 2008 financial crisis nearly torpedoed the takeover attempt. In 2009, despite objections from some shareholders who said the Porsche family was getting favorable treatment, Volkswagen agreed to acquire the Porsche car business. The deal left the Porsche family with a majority of Volkswagen’s voting shares and a quarter of the seats on the biggest company’s supervisory board.

The proposed spin-off is another example of putting family interests first, said Ferdinand Dudenhöffer, director of the Center Automotive Research in Duisburg, Germany.

The family, Mr. Dudenhöffer said in an email, “are the winners and secure their investment. Volkswagen, with its warped governance system, is the loser.

Porsche and Volkswagen have taken a big step towards electric vehicles. Porsche has done very well with its Taycan sports sedan, selling more than its flagship 911 and more than the combined 2021 sales of Tesla’s Model S and X.

Volkswagen and its luxury brand Audi have had more mixed results with their electric vehicles. Some like the ID.3 and ID.4 performed well, but others like the Audi e-tron SUV lagged behind comparable models from Tesla and other automakers. Sales were also limited by a global shortage of computer chips.

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Newsrust - US Top News: Volkswagen plans Porsche spin-off in IPO
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