Volkswagen Porsche merger delayed beyond 2011

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Volkswagen Porsche merger delayed beyond 2011

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Volkswagen has confirmed it will have to delay its merger with Porsche beyond this year because of legal issues.

They agreed in 2009 to merge by the end of 2011, but in February signalled delays because of investor lawsuits and a criminal investigation of Porsche’s former chief executive and its head of finance.

VW will also look at other ways of creating an integrated carmaking group and present any findings to the supervisory board before the end of the year.

The main causes of uncertainty are legal actions brought against Porsche in Germany and the United States for alleged stock market manipulation, Volkswagen added.

From VW’s perspective, the legal problems mean it is impossible to quantify the economic risks of a merger and perform a valuation of Porsche.

Porsche tried in 2009 to take over Volkswagen using complex financial derivatives, but abandoned the bid when its debt mounted, eventually forcing it to accept a takeover by its much larger peer, which led to the sacking of its management team.

Investors have sued Porsche in the US and in Germany, saying they suffered billions in losses when Porsche effectively cornered the market in tradable Volkswagen ordinary shares in 2008.

Investors allege Porsche quietly bought up the shares as part of a plan to take over Volkswagen, while saying publicly it had no plans to do so.

When Porsche revealed its holdings in October 2008, Volkswagen shares soared, briefly making the company the world’s biggest by market value. This caused losses for funds that had bet on a decline and now they want compensation.