In one of the automobile industry’s most important mergers, Volkswagen AG has paid $5.6 billion for the remaining 50.1% ownership stake in Porsche SE that it does not already own.
The deal puts an end to a battle that began in 2005 with a failed attempt by Porsche to takeover Volkswagen. The two companies can now officially consolidate with Volkswagen taking over the Porsche brand as well as its other automotive brands, including Bentley, Audi, Skoda, Bugatti, Seat and Lamborghini.
Volkswagen also owns truck makers MAN SE and Scania AB, and motorcycle manufacturer Ducati.
Volkswagen CEO Martin Winterkorn says: “We can now cooperate even more closely and jointly leverage new growth opportunities in the high-margin, premium segment. Combining their operating business will make Volkswagen and Porsche even stronger – both financially and strategically – going forward.”
According to Volkswagen, Porsche earning contributions for this year will be mainly offset by its purchase price. Volkswagen predicts a liquidity drain on its auto-making division of nearly $8.6 billion and expects a non-cash gain of over $11 billion.
After clearing the deal with the authorities involved, Volkswagen is paying the purchase price, plus transferring one share to Porsche to lower its tax bill. This marks the merger as an “internal restructuring” rather than a takeover, which helps avoid a 1 billion euro tax ($1.28 billion) bill that Volkswagen and Porsche had originally expected to pay to complete the merger before 2014.
New Porsche SUV In 2014
To kick things off, Volkswagen and Porsche are already working on a new compact Porsche SUV called the Macan, which is due out in 2014. Additionally, Volkswagen is planning to assemble certain Porsche models in its own plants.
Already a major player in the emerging automobile market in Russia, Latin America and China, Volkswagen is working to grow its global leader status by increasing its presence in the United States, where it recently opened a factory in Tennessee.
Plans are also in place to add an Audi plant in Mexico.
Key Statistics - Global Automotive Manufacturing Industry (source: MarketLine)
- With revenue exceeding $1.4 trillion in 2011, the global automotive manufacturing industry had a compound annual growth rate (CAGR) of 2.5% between 2007 and 2011.
- In 2011, industry consumption reached nearly 140,000 units, featuring a CAGR of nearly 3.5% over the four years from 2007 to 2011.
- From 2011 to 2016, the global automotive manufacturing industry is expected to accelerate, with an anticipated CAGR of over 7%, culminating in a market value over $2 trillion by the end of 2016.