Volkswagen-Porsche Merger Paused After Legal Tie-Up

The Volkswagen-Porsche merger is being put on the back burner, as legal obstacles have put a halt to the German automakers’ plans to combine operations by the end of this year.

In 2009, the German automakers agreed to combine their efforts by the end of 2011, but now more than halfway through the year, the legal tie-ups Porsche has been facing since it tried taking over VW have hindered the process. Porsche’s failed attempt to gain control of VW saddled the luxury carmaker with more than $14 million in debt.

In an official release from Volkswagen, the automaker says it has “reached the conclusion that the planned merger with Porsche SE cannot be implemented within the time frame provided for in the comprehensive agreement.”

Porsche is currently tied up in German courts and is also under U.S. investigation for market manipulation after short sellers of VW stock allege the automaker bought up VW’s shares, and later caused investors to lose more than $1 billion. Porsche continues to deny any of those claims.

According to Bloomberg, analysts are advising to sell VW stock and to "reduce" Porsche's stock. It is also speculated that it is unlikely for the suits to resolve any earlier than the middle of next year. Although these lawsuits raise a red flag, all hope is not lost for these two; Volkswagen said it would evaluate other ways in forming an integrated auto group, although there is little chance for a full merger anymore.

Source: Bloomberg, Volkswagen

 

 

 

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