Porsche, VW to Merge: Hostile takeover becomes uneasy merger

A white flag is fluttering over a family feud that had been raging in the wings of the global auto industry's center-stage drama. Porsche and VW are merging. The uneasy deal was struck this week in Salzburg, Austria, against the backdrop of a worldwide scramble to form alliances that shore up the sagging fortunes of numerous iconic manufacturers and brands.

This past January Porsche Automobil Holding SE (formerly Porsche AG) acquired a 51pct stake in VW with the stated intention of acquiring the 75pct position that would allow a total takeover of Europe's largest automaker.

Enter Lower Saxony and an obscure German law that allows a 20-pct minority shareholder veto power in any shift in ownership. The province has a 20-pct stake in VW and has been exercising its position in court. Add to that the open clash between Porsche chairman Wolfgang Porsche and VW chairman Ferdinand Piech over the €9-billion ($12-billion) debt Porsche has incurred during its pursuit of VW. Time and money for Porsche simply ran out, leading to this week's Porsche-VW merger in lieu of a Porsche takeover.

"It is not a marriage made in heaven, but a marriage of convenience," said Dr. Ing. Wendelin Wiedeking, Porsche CEO and President. Wiedking's company will be one brand in a new mega-company with the nine VW Group nameplates: Volkswagen, Audi, Bentley, SEAT, Skoda, Bugatti, Lamborghini plus the truck brands Scania AB and MAN AB.

And it's not over by a long shot. Announcements said the companies had agreed to a blueprint for the merger, estimated to be consummated in four weeks. Lower Saxony still has its oar in the water as do the two unions - one per company. So the final structure remains undertermined. Stay tuned.