VW CEO Martin Winterkorn has revealed that the company may need to hold off on their planned merger with Porsche until the risks from lawsuits in the US and tax issues in their home market of Germany have been resolved.
“The legal proceedings may drag on for some time to come until a final decision is reached. For that reason, the planned merger could possibly be delayed,” Winterkorn, also CEO of Porsche’s holding company, said today. “We’re still facing a tax-related hurdle and several legal obstacles.”
VW agreed to merge with Porsche in August 2009 after the indebtedness of Porsche tripled to more than 10 billion euros following a failed bid to buy VW by securing stock through options transactions.
Porsche is being sued by US based “short sellers” of VW stock who claim the car manufacturer secretly cornered the market in VW shares and later caused them more than $1 billion in losses.
35 plaintiffs are maintaining charges under U.S. securities law and, according to Max Warburton, senior analyst at Sanford C. Bernstein in London “The earliest the case could be dismissed is January,” he said. “Or the case could move forward and potentially take years to be settled.”
VW’s merger with Porsche is also being hampered by negotiations with German tax authorities as a merger before 2014 would result in higher taxation.
Should the planned merger come to nothing, VW would be prepared to switch to a mechanism that would allow Porsche to sell the rest of its car-making operations to VW for cash.
Porsche’s debt shrank to 6 billion euros on July 31 from 11.4 billion euros a year earlier, mainly because of the 3.9 billion euros VW paid for its stake of 49.9%.
Source: Bloomberg / Automotive News