Bloomberg News

VW ‘Plan B’ for Porsche May Prompt Asset Freeze, Lawyer Says

September 13, 2011

(Updates with VW and Porsche comment in sixth paragraph.)

Sept. 13 (Bloomberg) -- A lawyer with a 1.1 billion-euro ($1.5 billion) suit pending against Volkswagen AG and Porsche SE said he may try to stall the companies using an alternative plan to join their businesses.

If VW decides to pursue plans to buy Porsche’s operating units, instead of pursuing the merger of the companies that was put on hold last week, Franz Braun of Munich based law firm CLLB said he will review whether to ask the court hearing his case freeze Porsche assets.

VW and Porsche have the option to forego the full merger and instead fold Porsche’s auto-making business into VW while leaving the holding company to manage the VW shares. VW is currently evaluating such a plan, Chief Financial Officer Hans Dieter Poetsch told journalists last night, and the carmaker doesn’t plan to “wait too long” to complete the combination.

“They make it sound as if such a Plan B would be an easy thing to do,” Braun said. “Well, we certainly wouldn’t make it that easy for them.”

Because under the alternative scenario Porsche would become a mere holding company, the court could grant an order to put the deal on hold while the suit is pending. That would allow plaintiffs to collect if they won, said Braun.

“We won’t comment on any speculations,” VW spokesman Marco Dalan and Porsche spokesman Albrecht Bamler said in a joint statement on Braun’s comment. Porsche hasn’t yet received the suit, Bamler added.

Banks, Insurers

Braun represents a company bundling claims from 41 banks, insurance companies and investment funds that filed the suit against both companies on Sept. 7 in Braunschweig. The investors claim they were harmed by market manipulation in the trading of VW shares and disclosure rule violations.

The two companies put their original merger on hold last week due to ongoing lawsuits in Germany and the U.S. and investigations over accusations Porsche misled investors during a failed attempt to buy Wolfsburg, Germany-based VW. Porsche has repeatedly denied all of the allegations. The two agreed to combine in 2009 after Porsche racked up more than 10 billion euros of debt in the attempt to take over Volkswagen.

VW is currently reviewing the tax implications of exercising its option to buy the 50.1 percent stake in Porsche’s automotive unit that it doesn’t already own, Poetsch said, adding the process will take a few weeks.

Cash Payment

As part of the original deal struck in August 2009, VW can pay cash for the remaining stake in Porsche’s automobile operations through a put/call structure that allows the Stuttgart, Germany-based sports-car maker to sell the rest of its core business to VW. Those options can be exercised between November 2012 and January 2015.

“I now expect VW to make use of the put/call options,” Porsche CEO Matthias Mueller told reporters in Frankfurt today. “This cannot be done until 2012 though.”

While this option would allow VW to fully fold Porsche’s automotive business into the VW group, it would leave Porsche’s holding company to manage the VW shares and take legal and financial responsibility for the outcome of the lawsuits. The price to follow this route would be linked to the valuation of the auto-making business at the time of the purchase.

--With assistance from Andreas Cremer and Chris Reiter in Frankfurt. Editors: Christopher Scinta, Chad Thomas

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.


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