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How VW took over Porsche Add to ...

In mid-August, Volkswagen AG agreed to buy a 42 per cent stake in the sports car unit of debt-ridden Porsche Automobil Holding SE. This was the important step in combining the two German car makers.

In the deal, VW agreed to pay up to €3.3-billion this year for the initial stake in the unit. The entire deal will be completed by the end of 2011.

Volkswagen CEO Martin Winterkorn is poised to run the combined entity and has been named head of Porsche SE.

With Porsche on board, the Volkswagen group of companies now includes some of the world's best-known brands: Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini.

Under departed Porsche CEO Wendelin Wiedeking, Porsche had tried to take over the larger VW, using some €10-billion of debt to finance the purchase. Porsche managed to acquire 51 per cent of VW, but could not amass a crucial 75 per cent controlling share due to the financial crisis.

Porsche felt it needed VW for key components and technologies. Alone, Porsche felt it would not be able to meet stringent new pollution rules in Europe and elsewhere.

The Porsche and Piech families will remain the largest shareholders in the company to arise from the combination of VW and Porsche SE.

VW's home state of Lower Saxony, which owns a stake of 20 per cent in Volkswagen, will retain the right to block important decisions and to nominate two members of the supervisory board.

The deal will also make the Gulf state of Qatar the third-largest investor in the combined company. Reports say Qatar will hold the equivalent of 17 per cent of VW stock.

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