- The Washington Times - Sunday, March 25, 2007

FRANKFURT, Germany (AP) — Prestigious automaker Porsche will increase its stake in Volkswagen AG, maker of the Beetle, Golf and Jetta, in a widely expected move aimed at keeping the company firmly in German hands.

A spokesman for Porsche said the company did not plan to acquire Volkswagen, Europe’s biggest automaker, which is partly owned by the state of Lower Saxony and is considered both an industrial powerhouse and a major provider of jobs.

Stuttgart-based Porsche AG, which makes expensive sports cars such as the 911 and Boxster, said Saturday it would increase its stake in Volkswagen from 27.3 percent to 31 percent this week, a move that legally obliges it to make a mandatory takeover offer for the company.

Michael Baumann, a Porsche spokesman, said the company will offer only the legal minimum $134.50 per Volkswagen share, lower than the $156.86 at which VW shares closed in Frankfurt trading Friday.

“We do not expect many Volkswagen shareholders to offer us their shares,” Mr. Baumann said. “Which means simply that we intend to go to 31 percent. We do not by any means intend to take over.”

The offer is set to take place today.

Volkswagen’s board chairman, former Chief Executive Officer Ferdinand Piech, is a member of the family that controls Porsche. He is the grandson of Ferdinand Porsche, the designer of VW’s original Beetle model. The Porsche and Piech families own more than half of Porsche’s stock and voting shares.

Mr. Baumann said the companies, which target completely different buyers, will remain separate, quashing any sentiment that upscale consumers seeking a new Cayenne will be able to go to a Volkswagen dealership to find one.

“Porsche remains Porsche,” he said.

Porsche said it was seeking the larger stake as a response to fears that judges in the European Union will force the German government to repeal its law blocking a foreign takeover of Volkswagen.

It cited the Feb. 13 opinion of EU Advocate General Damaso Ruiz-Jarabo Colomer, who said the German government’s regulation that limits any shareholder’s voting rights to 20 percent was “not based on overriding reasons relating to the public interest.”

The European Union took Germany to court over the issue in 2005. The advocate’s opinions are not binding on EU judges, but the union’s highest court follows them roughly 80 percent of the time.

Porsche said it assumed “that the European Court of Justice would confirm the invalidity of the VW law and so cause the German government to change or abolish this law.”

German law requires that the takeover offer be made only once, not that it succeed, Mr. Baumann said. The next threshold for a mandatory takeover offer is 50 percent.

At 31 percent, Porsche will be Volkswagen’s largest shareholder followed only by Lower Saxony, which holds 20.3 percent.

Porsche plans to form a new holding company that will make Porsche AG a wholly owned subsidiary of the new company, which also will oversee the stake in Volkswagen.

“This company will then continue the current business operations of the sports car manufacturer under the existing company name Dr. Ing. h.c. F. Porsche AG,” Mr. Baumann said.

Other companies that have made the change include German insurer Allianz, Finland’s Elcoteq, Swedish financial-service company Nordea and Norway’s Narada Europe.

Volkswagen was seemingly accepting of the Porsche move.

“The VW group and its eight brands still have high potential,” said Volkswagen CEO Martin Winterkorn. “I’m sure that Porsche like any other investor is making a good investment in the VW share.”

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