Porsche backs away from buying VW majority this year
STUTTGART, Germany (Reuters) - Porsche SE (PSHG_p.DE) may not take majority control of Volkswagen AG this year as planned, it said, insisting it would not pay "ridiculous" prices for more shares in Europe's biggest carmaker.
"In light of the current economic environment, it therefore becomes increasingly unrealistic to achieve this goal within 2008," Chief Executive Wendelin Wiedeking told Porsche's annual news conference on Wednesday.
The goal remained to raise its voting stake above 50 percent as soon as possible, he said, but added: "We are under no time pressure." He reaffirmed his intention to take Porsche's stake to 75 percent in 2009.
Porsche would like to take full control over strategic decisions and VW's (VOWG.DE) profits next year by raising its stake above this threshold, but German law and VW statutes give VW's home state of Lower Saxony the right for now to veto these plans with its 20 percent stake.
Porsche finance chief Holger Haerter said Porsche was not willing to acquire shares for "economically ridiculous" prices due to the significant write-down risks to goodwill.
"And precisely that (is what) we wish to avoid," the CFO said.
He also said capital adequacy regulations that require banks to have a minimum equity cushion were making it difficult for small and mid-size suppliers to gain access to bank loans.
"We therefore demand that these provisions are suspended at least for the time being in order to give companies air to breathe in these difficult economic times," Haerter said.
LAW ABIDING
Porsche stock rose 2.8 percent to 54.25 euros by 5:47 a.m. EST and Volkswagen gained 4.3 percent to 265.98 euros while the DJ Stoxx European autos index .SXAP was up 3.8 percent. VW's more liquid preferred shares (VOWG_p.DE) edged up 0.2 percent to 33.69 euros.
Porsche's CEO Wiedeking said he could not make a reliable forecast for the current fiscal year, but said he expected sales in fiscal 2008/09 to end-July to drop notably. Wiedeking said Porsche has initiated a cost-cutting program given such weak auto markets.
Last year it earned 8.57 billion euros ($11.13 billion) before tax -- more than its revenue -- after making a windfall 6.8 billion profit from hedging against a rise in VW shares.
The market and analysts have said Porsche is likely to have made a killing in October after it triggered a stampede to close short positions in Volkswagen shares by announcing it had secured access to 74.1 percent of VW votes, draining the effective free float to less than 6 percent.
Although Porsche said the announcement would let short sellers unwind positions "without haste or considerable risk," the stock nearly quintupled within 48 hours, rocketing to over 1,000 euros and briefly making VW the world's most valuable corporation.
It prompted scrutiny by German securities watchdog BaFin and complaints from the head of DWS, a Deutsche Bank (DBKGn.DE) unit and Germany's largest retail fund management firm, who accused Porsche of breaking the law.
German billionaire Adolf Merckle took massive losses after betting incorrectly on the price of VW shares.
Porsche's CFO Haerter flatly denied manipulating the share price, explaining its disclosure came after it noticed unusual movement in VW stock when it rose to 400 euros and then halved within one week. He added that Porsche "strictly abides by the law."
It also was alarmed by one broker who asked whether it could lend VW ordinary shares in large amounts on a long-term basis.
"Let me emphasize and make it quite clear that our decision to acquire a stake in Volkswagen was and is based solely and exclusively on our industrial logic and not on the wish to make money at the expense of a third party," Haerter said.
(Editing by Sharon Lindores)
