Volkswagen last night agreed to buy a 42 per cent stake in the sports car unit of debt-ridden Porsche SE, another step toward combining the two German carmakers into a European automotive giant.
VW will pay up to €3.3 billion ($4.7 billion) this year for the initial stake in the unit, Porsche AG, paving the way for the creation of an "integrated" automotive group by the end of 2011, VW and Porsche said in statements after board meetings.
Volkswagen chief executive Martin Winterkorn, who is poised to run the combined entity and was named head of Porsche SE yesterday, said the deal marked “a new era” for both companies.
“Porsche is a real enrichment for our company's portfolio," he said.
The combined company will have 10 brands, adding the Porsche marque to a stable that already includes Audi, Bentley, Bugatti, Skoda, Seat and Lamborghini.
To finance the purchase, Volkswagen plans a capital increase of preference shares in the first half of 2010, VW said.
Porsche's surrender comes at the end of a months-long power struggle that eventually led to the departure of Porsche Chief Executive Wendelin Wiedeking. It marks a triumph for Volkswagen CEO Winterkorn and VW chairman Ferdinand Piech.
Porsche had sought to seize control over Volkswagen - already Europe's biggest carmaker - as a way to gain access to key components and technologies it needs to meet stringent new pollution rules. That left it with just over half of VW votes.
But Porsche's takeover attempt backfired after it took on more than €10 billion in debt, forcing it to seek help from Volkswagen. VW supplies components for about a third of all Porsche cars, including bodies of the four-door Cayenne and Panamera models.
VW's powerful labour chief welcomed the agreement. “Today industrial history was made,” Bernd Osterloh said.
In a further step to alleviate Porsche SE's debt, Porsche's controlling families will sell their car trading business, Europe's largest, to Volkswagen. The business, with an enterprise value of €3.55 billion, will be sold by 2011.
Reuters